AUSA ENDEAVOR VARIABLE ANNUITY ACCOUNT, 485BPOS, 1998-04-29

AUSA ENDEAVOR VARIABLE ANNUITY ACCOUNT
485BPOS, 1998-04-29

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As filed with the Securities and Exchange Commission on April 29, 1998

Registration No. 33- 83560
811-8750
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549

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FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Pre-Effective Amendment No.___

Post-Effective Amendment No. 7 X
--

and

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940

Amendment No. 8 X
--

AUSA ENDEAVOR VARIABLE ANNUITY ACCOUNT
--------------------------------------
(Exact Name of Registrant)

AUSA LIFE INSURANCE COMPANY, INC.
---------------------------------
(Name of Depositor)

666 Fifth Avenue, New York, New York 10103
(Address of Depositor's Principal Executive Offices)

Depositor's Telephone Number, including Area Code

(212) 246-5234

Frank A. Camp, Esquire
AUSA Life Insurance Company, Inc.
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499
(Name and Address of Agent for Service)

Copy to:

Frederick R. Bellamy, Esquire

Sutherland, Asbill & Brennan L.L.P.
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404

1
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Title of Securities Being Registered:

Flexible Premium Variable Annuity Policies

______________

It is proposed that this filing will become effective:

______________

_____ immediately upon filing pursuant to paragraph (b) of Rule
485.

__X__ on May 1, 1998 pursuant to paragraph (b) of Rule 485.

_____ 60 days after filing pursuant to paragraph (a)(i) of Rule
485.

_____ on ______ pursuant to paragraph (a)(i) of Rule
485.

_____ 75 days after filing pursuant to paragraph (a)(i)

_____ on _____________ pursuant to paragraph (a)(ii) of Rule
485.

If appropriate, check the following box:

__X__ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

2
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CROSS REFERENCE SHEET
Pursuant to Rule 495

Showing Location in Part A (Prospectus) and
Part B (Statement of Additional Information)
of Registration Statement of Information Required by Form N-4
-------------------------------------------------------------

PART A
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<TABLE>
<CAPTION>
Item of Form N-4 Prospectus Caption
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<S> <C>
1. Cover Page ...................... Cover Page

2. Definitions ..................... Definitions

3. Synopsis ........................ Summary; Historical Performance
Data

4. Condensed Financial Information Financial Statements

5. General
(a) Depositor ................... AUSA Life
............................. Insurance Company, Inc.
(b) Registrant .................. The Mutual Fund Account
(c) Portfolio Company ........... Underlying Funds
(d) Fund Prospectus ............. Underlying Funds
(e) Voting Rights ............... Voting Rights

6. Deductions and Expenses
(a) General ..................... Charges and Deductions
(b) Sales Load % ................ Contingent Deferred Sales Charge
(c) Special Purchase Plan ....... N/A
(d) Commissions ................. Distributor of the Policies
(e) Expenses - Registrant ....... N/A
(f) Fund Expenses ............... Expenses Including Investment
Advisory Fees
(g) Organizational Expenses ..... N/A

7. Policies
(a) Persons with Rights ......... The Policy; Election of Annuity
Option; Determination of Annuity
Payments; Annuity Commencement
Date; Ownership of the Policy
Voting Rights
(b) (i) Allocation of Premium
Payments .............. Allocation of Premiums
(ii) Transfers ............. Transfers
(iii) Exchanges ............. N/A
(c) Changes ..................... Addition, Deletion or
Substitution of Investments;
Election of Annuity Option;
Annuity Commencement Date;
</TABLE>

3
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<TABLE>
<S> <C>
Beneficiary; Ownership of the
Policy
(d) Inquiries ................... Summary
8. Annuity Period .................. Annuity Options

9. Death Benefit ................... Death of Annuitant Prior to
Annuity Commencement Date

10. Purchase and Policy Values ......
(a) Purchases ................... Policy Application and Issuance
of Policies; Premiums
(b) Valuation ................... Policy Value; The Mutual Fund
Account Value
(c) Daily Calculation ........... The Mutual Fund Account Value
(d) Underwriter ................. Distributor of the Policies

11. Redemptions
(a) By Owners ................... Surrenders
By Annuitant ................ N/A
(b) Texas ORP ................... Restrictions Under the Texas
Optional Retirement Program
(c) Check Delay ................. Payment not Honored by Bank
(d) Lapse ....................... N/A
(e) Free Look ................... Summary

12. Taxes ........................... Certain Federal Income Tax
Consequences

13. Legal Proceedings ............... Legal Proceedings

14. Table of Contents for the
Statement of Statement of Additional
Additional Information .......... Information
<CAPTION>
PART B
------

Item of Form N-4 Statement of Additional
- ---------------- Information Caption
-------------------
<S> <C>
15. Cover Page ...................... Cover Page

16. Table of Contents ............... Table of Contents

17. General Information
and History ..................... (Prospectus) AUSA
Life Insurance Company, Inc.
18. Services ........................
(a) Fees and Expenses
of Registrant .............. N/A
(b) Management Policies ........ N/A
(c) Custodian .................. Custody of Assets
Independent
</TABLE>

4
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<TABLE>
<S> <C>
Auditors ................... Independent Auditors
(d) Assets of Registrant ....... Custody of Assets
(e) Affiliated Person .......... N/A
(f) Principal Underwriter ...... Distribution of the Policies
19. Purchase of Securities
Being Offered ................... Distribution of the Policies
Offering Sales Load ............. N/A

20. Underwriters .................... Distribution of the Policies;
(Prospectus) Distributor of the
Policies

21. Calculation of Performance
Data ............................ Calculation of Yields and Total
Returns; Other Performance Data

22. Annuity Payments ................ (Prospectus) Election of Annuity
Option; (Prospectus)
Determination of Annuity Payments

23. Financial Statements ............ Financial Statements
</TABLE>

PART C -- OTHER INFORMATION
---------------------------
<TABLE>
<CAPTION>
Item of Form N-4 Part C Caption
- ---------------- --------------
<S> <C>
24. Financial Statements
and Exhibits .................... Financial Statements and Exhibits
(a) Financial Statements ....... Financial Statements
(b) Exhibits ................... Exhibits

25. Directors and Officers of ....... Directors and Officers of the
the Depositor Depositor

26. Persons Controlled By or Under .. Persons Controlled By or Under
Common Control with the Common Control with the
Depositor or Registrant Depositor or Registrant

27. Number of Policyowners .......... Number of Policyowners

28. Indemnification ................. Indemnification

29. Principal Underwriters .......... Principal Underwriters

30. Location of Accounts
and Records ..................... Location of Accounts and Records

31. Management Services ............. Management Services

32. Undertakings .................... Undertakings

Signature Page .................. Signatures

5
</TABLE>
<PAGE>

PROSPECTUS____________________________________________________ MAY 1, 1998

THE ENDEAVOR VARIABLE ANNUITY
Issued Through
AUSA ENDEAVOR VARIABLE ANNUITY ACCOUNT
by
AUSA LIFE INSURANCE COMPANY, INC.

The Endeavor Variable Annuity Policy is a Flexible Premium Variable Annuity
that is offered by AUSA Life Insurance Company, Inc. ("AUSA Life"). You can
use the Policy to accumulate funds for retirement or other long-term financial
planning purposes. You are generally not taxed on any earnings on amounts you
invest until you withdraw them or begin to receive Annuity Payments. The
Policy is a "variable" annuity because the value of your investments can go up
or down based on the performance of mutual fund portfolios that you select. It
is a flexible premium policy because after you purchase it you can generally
make additional investments of any amount of $50 or more, until the Annuity
Commencement Date when AUSA Life begins making Annuity Payments to you.

You have several investment options to choose from. They include the
following variable investment options:

Dreyfus U.S. Government Securities
Endeavor Asset Allocation Portfolio Portfolio

Endeavor Money Market Portfolio Endeavor Value Equity Portfolio
T. Rowe Price International Stock
Portfolio Endeavor Opportunity Value Portfolio
T. Rowe Price Equity Income
Portfolio
Endeavor Enhanced Index Portfolio
WRL Growth Portfolio
T. Rowe Price Growth Stock Portfolio
Dreyfus Small Cap Value Portfolio

You as the Owner of the Policy, bear the entire investment risk for all
amounts that you allocate to any of the mutual funds. This means that you
could lose the amount that you invest. But if the mutual fund shares increase
in value, then the value of your Policy will also increase.

The Fixed Account is an additional investment option. If you invest in one
of the alternatives available under the Fixed Account, then AUSA Life
guarantees to return your investment with interest at rates that AUSA Life
will declare from time to time.

Of course, you can choose any combination of these investment options. You
can also transfer amounts among these options (subject to some restrictions).

LIKE ALL SECURITIES, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

You should only purchase a Policy as a long-term investment. However, you do
have access to all or some of the current cash value of your investments at
any time before the Annuity Commencement Date. But, if you do withdraw cash
from your Policy, there may be a surrender charge. You may also have to pay
income taxes on some or all of the amount you withdraw, and if you are under
the age 59 1/2 there may also be a tax penalty. AUSA Life has the right to
postpone withdrawals from the Fixed Account.

Prospectuses for the mutual fund portfolios are attached to the back of this
Prospectus. This Prospectus and the mutual fund prospectuses give you vital
information about the Policies and the mutual funds. Please read them
carefully before you invest. Keep them for future reference.
<PAGE>

PLEASE NOTE THAT THE POLICIES AND THE MUTUAL FUNDS: ARE NOT BANK DEPOSITS,
ARE NOT FEDERALLY INSURED, ARE NOT ENDORSED BY ANY BANK OR GOVERNMENT AGENCY
AND ARE NOT GUARANTEED TO ACHIEVE THEIR GOAL.

This Prospectus sets forth the information that a prospective purchaser
should consider before purchasing a Policy. A Statement of Additional
Information about the Policy and the Mutual Fund Account which has the same
date as this Prospectus has been filed with the Securities and Exchange
Commission ("SEC") and is incorporated herein by reference. The Statement of
Additional Information is available at no cost to any person requesting a copy
by writing AUSA Life at the Service Office or by calling 1-800-525-6205. The
table of contents of the Statement of Additional Information is included at
the end of this Prospectus.

This Prospectus and the Statement of Additional Information generally
describe only the Policies and the Mutual Fund Account, except when the Fixed
Account is specifically mentioned.

Service Office:
Financial Markets Division--Variable Annuity Department
AUSA Life Insurance Company, Inc.
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499-0001

Administrative Office:
AUSA Life Insurance
Company, Inc.
666 Fifth Avenue, 25th Floor
New York, NY 10103

Home Office:
4 Manhattanville Road
Purchase, New York 10577

Please Read This Prospectus Carefully.

Keep it For Future Reference.

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESPERSON OR OTHER PERSON
IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON.

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TABLE OF CONTENTS

<TABLE>
<S> <C>
DEFINITIONS................................................................ 5
SUMMARY.................................................................... 8
FEE TABLE.................................................................. 12
CONDENSED FINANCIAL INFORMATION............................................ 18
FINANCIAL STATEMENTS....................................................... 19
HISTORICAL PERFORMANCE DATA................................................ 20
Standardized Performance Data............................................ 20
Endeavor Money Market Subaccount....................................... 20
Other Subaccounts...................................................... 20
Non-Standardized Performance Data........................................ 21
PUBLISHED RATINGS.......................................................... 25
AUSA LIFE INSURANCE COMPANY, INC........................................... 25
THE ENDEAVOR ACCOUNTS...................................................... 25
The Mutual Fund Account.................................................. 25
The Underlying Funds................................................... 26
Addition, Deletion and Substitution of Investments..................... 28
The Fixed Account........................................................ 29
Guaranteed Period...................................................... 30
Dollar Cost Averaging Fixed Account Option............................. 30
Current Interest Rates................................................. 31
Transfers................................................................ 31
Reinstatements........................................................... 32
Dollar Cost Averaging (DCA).............................................. 32
Asset Rebalancing........................................................ 33
THE POLICY................................................................. 33
Policy Application and Issuance of Policies--Premium Payments............ 33
Annuity Purchase Value................................................... 34
Amendments............................................................... 35
Non-participating Policy................................................. 35
DISTRIBUTIONS UNDER THE POLICY............................................. 35
Surrenders............................................................... 35
Systematic Payout Option................................................. 36
Annuity Payments......................................................... 37
Annuity Commencement Date.............................................. 37
Election of Payment Option............................................. 37
Premium Tax............................................................ 38
Supplementary Policy................................................... 38
Annuity Payment Options.................................................. 38
Guaranteed Values...................................................... 38
Variable Payment Options............................................... 39
Determination of First Variable Payment................................ 40
Determination of Additional Variable Payments.......................... 40
Transfers.............................................................. 40
Tax Withholding........................................................ 41
Adjustment of Annuity Payments......................................... 41
Death Benefit............................................................ 41
Death of Annuitant Prior to Annuity Commencement Date.................. 41
Adjusted Partial Withdrawals........................................... 41
Death On or After Annuity Commencement Date............................ 42
Beneficiary............................................................ 42
Death of Owner........................................................... 42
Restrictions Under Section 403(b) Plans.................................. 43
</TABLE>

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<TABLE>
<S> <C>
Restrictions Under Qualified Policies.................................... 43
CHARGES AND DEDUCTIONS..................................................... 43
Surrender Charge......................................................... 43
Mortality and Expense Risk Fee........................................... 44
Administrative Charges................................................... 45
Premium Taxes............................................................ 45
Federal, State and Local Taxes........................................... 45
Transfer Charge.......................................................... 45
Other Expenses Including Investment Advisory Fees........................ 46
Employee and Agent Purchases............................................. 46
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.................................... 46
Tax Status of the Policy................................................. 47
Taxation of Annuities.................................................... 47
DISTRIBUTOR OF THE POLICIES................................................ 52
VOTING RIGHTS.............................................................. 52
YEAR 2000 MATTERS.......................................................... 53
LEGAL PROCEEDINGS.......................................................... 53
STATEMENT OF ADDITIONAL INFORMATION........................................ 54
</TABLE>

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<PAGE>

DEFINITIONS

Accumulation Unit--An accounting unit of measure used in calculating the
Annuity Purchase Value in the Mutual Fund Account before the Annuity
Commencement Date.

Administrative Office--AUSA Life Insurance Company, Inc., 666 Fifth Avenue,
25th Floor, New York, NY, 10103.

Annuitant--The person entitled to receive Annuity Payments after the Annuity
Commencement Date and during whose life any Annuity Payments involving life
contingencies will continue.

Annuity Commencement Date--The date upon which Annuity Payments are to
commence. This date may be any date at least thirty days after the Policy Date
and may not be later than the last day of the policy month starting after the
Annuitant attains age 85, except as expressly allowed by AUSA Life. In no
event will this date be later than the last day of the policy month following
Annuitant's 90th birthday.

Annuity Payment Option or Payment Option--A method of receiving a stream of
Annuity Payments selected by the Owner.

Annuity Purchase Value--The value in the policy that may be used to purchase
a stream of Annuity Payments. On or before the Annuity Commencement Date, this
is an amount equal to (a) the Premiums Paid; minus (b) partial withdrawals
taken; plus (c) interest credited in the Fixed Account; plus (d) accumulated
gains or losses in the Mutual Fund Account; minus (e) any applicable service
charges, premium taxes, and transfer fees.

Annuity Unit--An accounting unit of measure used in the calculation of the
amount of the second and each additional Variable Annuity Payment.

Beneficiary--The person who has the right to the Death Benefit set forth in
the Policy.

Business Day--A day when the New York Stock Exchange is open for business.

Cash Value--The Annuity Purchase Value less the Surrender Charge, if any.

Code--The Internal Revenue Code of 1986, as amended.

Contingent Deferred Sales Charge--The applicable Surrender Charge, assessed
on certain full or partial withdrawals of Premium Payments to cover expenses
relating to the sale of the Policies.

Current Interest Rate--The interest rate currently guaranteed to be credited
on amounts under a Policy allocated to the Fixed Account. This interest rate
will always equal or exceed a minimum of 3%.

Date of Issue--The date the Policy is issued, as shown on the Policy data
page.

Due Proof of Death--A certified copy of a death certificate, a certified
copy of a decree of a court of competent jurisdiction as to the finding of
death, a written statement by the attending physician, or any other proof
satisfactory to AUSA Life will constitute Due Proof of Death.

Excess Premium Withdrawals--The amount of a Premium Payment withdrawal which
is more than the amount that may be taken free from Surrender Charge.

Fixed Account--A part of the general account of AUSA Life. General account
assets consist of all of the assets of AUSA Life that are not in separate
accounts.

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Fixed Annuity Payments--Payments made pursuant to an Annuity Payment Option
which do not fluctuate in amount.

Guaranteed Period Option--The one year guaranteed interest rate period which
will be offered by AUSA Life into which premiums may be paid or amounts
transferred.

Investment Options--The One Year Guaranteed Period Option of the Fixed
Account, and the Dollar Cost Averaging Fixed Account Option, and any of the
Subaccounts of the Mutual Fund Account.

Mutual Fund Account--A separate account established and registered as a unit
investment trust under the Investment Company Act of 1940, as amended, (the
"1940 Act"), to which Premium Payments under the Policies may be allocated and
which invests in the WRL Growth Portfolio of the WRL Series Fund, Inc. and
designated portfolios of the Endeavor Series Trust and such other mutual funds
as AUSA Life may determine from time to time.

Nonqualified Policy--A Policy other than a Qualified Policy.

Policy--One of the variable annuity policies offered by this Prospectus.

Policy Anniversary--Each anniversary of the Date of Issue.

Policy Owner or Owner--The person who may exercise all rights and privileges
under the Policy. The Policy Owner during the lifetime of the Annuitant and
prior to the Annuity Commencement Date is the person designated as the Policy
Owner or a Successor Owner in the application. (See "DISTRIBUTIONS UNDER THE
POLICY--Death Benefit," p. 49)

Policy Year--A Policy Year begins on the Date of Issue and on each Policy
Anniversary.

Premium Payment--An amount paid to AUSA Life by the Policy Owner or on the
Policy Owner's behalf as consideration for the benefits provided by the
Policy.

Qualified Policy--A Policy issued in connection with retirement plans that
qualify for special Federal income tax treatment.

Service Charge--An annual charge on each Policy Anniversary for Policy
maintenance and related administrative expenses. This annual charge is the
lesser of 2% of the Policy Value or $35.

Service Office--Financial Markets Division--Variable Annuity Dept., 4333
Edgewood Road, N.E., Cedar Rapids, Iowa 52499-0001.

Subaccount--A subdivision within the Mutual Fund Account the assets of which
are invested in a specified Portfolio of the Underlying Funds.

Successor Policy Owner--A person appointed by the Policy Owner to succeed to
ownership of the Policy in the event of the death of the Policy Owner who is
not the Annuitant before the Annuity Commencement Date.

Surrender Charge--A percentage of each Excess Premium Withdrawal, which is
deducted by AUSA Life upon surrender or partial withdrawal from the Policy.
The Surrender Charge Percentage ranges from 7% to 0% depending upon the length
of time from the date of each Premium Payment to the date of withdrawal. A
Surrender Charge may also be referred to as a "Contingent Deferred Sales
Charge."

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Underlying Funds--The WRL Growth Portfolio of the WRL Series Fund, Inc. and
designated portfolios of the Endeavor Series Trust.

Valuation Period--The period of time from one determination of Accumulation
Unit and Annuity Unit values to the next subsequent determination of values.
Such determination shall be made on each Business Day.

Variable Annuity Payments--Payments made pursuant to an Annuity Payment
Option which fluctuate as to dollar amount or payment term in relation to the
investment performance of the specified Subaccounts within the Mutual Fund
Account.

Written Notice or Written Request--Written notice, signed by the Policy
Owner, that gives AUSA Life the information it requires and is received at the
Service Office. For some transactions, AUSA Life may accept an electronic
notice. Such electronic notice must meet the requirements AUSA Life
establishes for such notices. Telephone instructions are not permitted.

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<PAGE>

THE ENDEAVOR VARIABLE ANNUITY

SUMMARY

The following Summary is intended to provide a brief overview of the Policy.
More detailed information can be found in the sections of this Prospectus that
follow, all of which should be read in their entirety.

THE POLICY

The Endeavor Variable Annuity is a Flexible Premium Variable Annuity which
can be purchased as a Nonqualified Policy or as a Qualified Policy. The Owner
allocates the Premium Payments among the Mutual Fund Account or the Fixed
Account (together, the "Accounts").

THE ACCOUNTS

The Mutual Fund Account. The Mutual Fund Account is a separate account of
AUSA Life, which has dedicated a number of subaccounts to the Policy that
invest exclusively in shares of designated portfolios of the Endeavor Series
Trust and the Growth Portfolio of the WRL Series Fund, Inc. (collectively, the
"Underlying Funds"). The Endeavor Series Trust is a mutual fund managed by
Endeavor Investment Advisers, a general partnership between Endeavor
Management Co. and AUSA Financial Markets, Inc. (an affiliate of AUSA Life),
which contracts with several subadvisers (as described in separate
prospectuses that accompany this Prospectus) for investment advisory services.
The WRL Growth Portfolio is a portfolio within the WRL Series Fund, Inc. The
WRL Series Fund, Inc. is a mutual fund whose investment adviser is WRL
Investment Management, Inc., a subsidiary of Western Reserve Life Assurance
Co. of Ohio ("Western Reserve"), (an affiliate of AUSA Life). WRL Investment
Management, Inc. contracts with Janus Capital Corporation as a subadviser to
the WRL Growth Portfolio for investment advisory services.

The portfolios of the Underlying Funds currently offered are as follows:

Endeavor Asset Allocation Portfolio Dreyfus U.S. Government Securities
Portfolio

Endeavor Money Market Portfolio Endeavor Value Equity Portfolio

T. Rowe Price International Stock Endeavor Opportunity Value Portfolio
Portfolio

T. Rowe Price Equity Income Endeavor Enhanced Index Portfolio
Portfolio
WRL Growth Portfolio

T. Rowe Price Growth Stock Portfolio

Dreyfus Small Cap Value Portfolio

Each of the Subaccounts of the Mutual Fund Account invests solely in a
corresponding Portfolio of the Underlying Funds. BECAUSE THE POLICY VALUE MAY
DEPEND ON THE INVESTMENT EXPERIENCE OF THE SELECTED SUBACCOUNTS, THE OWNER
BEARS THE ENTIRE INVESTMENT RISK WITH RESPECT TO PREMIUM PAYMENTS ALLOCATED
TO, AND AMOUNTS TRANSFERRED TO, THE MUTUAL FUND ACCOUNT. (See "THE ENDEAVOR
ACCOUNTS--The Mutual Fund Account," p. 24.)

The Fixed Account. The Fixed Account offers two Investment Options, a one-
year Guaranteed Period Option and a Dollar Cost Averaging Fixed Account
Option. AUSA Life guarantees a minimum annual effective interest rate of 3% on
Premium Payments and transfers to, less partial withdrawals and transfers
from, the Fixed Account. AUSA Life may, in its sole discretion, declare a
higher Current Interest Rate. A Current Interest Rate is guaranteed for at
least one year, although certain Dollar Cost Averaging programs may run for
shorter periods. Upon surrender, AUSA Life guarantees return of at least the
Premium Payments made to, less prior Partial Withdrawals and transfers from,
the Fixed Account. (See "THE ENDEAVOR ACCOUNTS--The Fixed Account," p. 28.)

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<PAGE>

AUSA Life reserves the right to offer additional Investment Options, or to
delete Investment Options in the future, subject to applicable law.

PREMIUM PAYMENTS

A Nonqualified Policy may be purchased with a minimum initial Premium
Payment of $5,000, and a Qualified Policy generally may be purchased with a
minimum initial Premium Payment of $1,000. A Policy purchased and used in
connection with a tax deferred 403(b) annuity may be purchased with a minimum
initial Premium Payment of $50. An Owner may make additional Premium Payments
of at least $50 each, including payments through preauthorized check, at any
time before the Annuity Commencement Date. The maximum total premium payments
allowed is $1,000,000 without prior approval of AUSA Life. There is nothing
deducted from Premium Payments at the time of purchase, so all funds are
invested immediately.

On the Date of Issue, the initial Premium Payment is allocated among the
Investment Options in accordance with the allocation percentages specified by
the Owner in the Policy application. Any allocation must be in whole percents,
and the total allocation must equal 100%. Additional Premium Payments are
allocated among the Investment Options the same as initial Premium Payments
unless the allocation is changed by the Owner. Allocations may be changed by
sending Written Notice to AUSA Life's Service Office. (See "THE POLICY--Policy
Application and Issuance of Policies--Premium Payments," p. 32.)

TRANSFERS BEFORE THE ANNUITY COMMENCEMENT DATE

An Owner can transfer Annuity Purchase Values from one Subaccount to another
within the Mutual Fund Account or to the Fixed Account, or from the One Year
Guaranteed Period Option of the Fixed Account to the Mutual Fund Account. The
minimum amount which may be transferred is $500 or the entire Annuity Purchase
Value in the Subaccount or Guaranteed Period Option, whichever is less.
However, following a transfer out of an Investment Option, at least $500 must
remain in that Investment Option, otherwise AUSA Life reserves the right to
include the remaining amounts in the transfer. Transfers currently may be made
by sending the appropriate Written Notice or Request to the Service Office.

An Owner can also transfer an amount equal to the interest credited in the
One Year Guaranteed Period Option to any Subaccount of the Mutual Fund Account
prior to the end of the Guaranteed Period. Such "Interest Transfers" may
affect the interest crediting rate experienced on amounts remaining in the
One-Year Guaranteed Period Options, because AUSA Life deems all withdrawals to
be on a "first-in, first-out" basis for the purpose of crediting interest.

Transfers from the Dollar Cost Averaging Fixed Account Option, except
through automatic Dollar Cost Averaging transfers, are not allowed. (See "THE
ENDEAVOR ACCOUNTS--Dollar Cost Averaging Fixed Account Option," p. 29.)

The maximum amount of Annuity Purchase Value that can be transferred from
the One Year Guaranteed Period Option prior to the end of the Guaranteed
Period is 25% of the Annuity Purchase Value in that Option, less amounts
previously transferred out of that Option during the current policy year. The
entire Annuity Purchase Value may be transferred from the One Year Guaranteed
Period Option at the end of the Guaranteed Period.

A $10 charge may be imposed for each transfer in excess of 12 transfers per
Policy Year. Currently AUSA Life does not charge for any transfers. (See "THE
ENDEAVOR ACCOUNTS--Transfers," p. 30.)

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<PAGE>

SURRENDERS

The Owner may elect to surrender all or a portion of the Cash Value ($500
minimum) in exchange for a cash withdrawal payment from AUSA Life at any time
prior to the earlier of the Annuitant's death or the Annuity Commencement
Date. A Surrender or partial withdrawal may be subject to deductions for
Surrender Charges. (See "CHARGES AND DEDUCTIONS," p. 42.) The Cash Value
equals the Annuity Purchase Value less any applicable Surrender Charge
(described below). A surrender request must be made by Written Request, and a
request for a partial withdrawal must specify the Guaranteed Period Option or
Subaccounts from which the withdrawal is requested. There is currently no
limit on the frequency or timing of withdrawals (See "DISTRIBUTIONS UNDER THE
POLICY--Surrenders," p. 34) although for Qualified Policies the retirement
plan or applicable law may restrict and/or penalize withdrawals. In addition
to the applicable charges and deductions under the Policy and any applicable
premium taxes, surrenders and partial withdrawals may be subject to income
taxes and a 10% Federal penalty tax.

CHARGES AND DEDUCTIONS

Surrender Charge. In order to permit investment of the entire Premium
Payment, AUSA Life does not deduct sales or other charges at the time of
investment. However, a Surrender Charge of up to 7% of the amount withdrawn is
imposed on certain surrenders or partial withdrawals of Premium Payments in
order to cover expenses relating to the sale of the Policies. A Surrender
Charge will only be applied to withdrawals that exceed the amount available
under certain listed exceptions. The applicable Surrender Charge is based on
the period of time elapsed since payment of the Premium Payment(s) being
withdrawn. There is no Surrender Charge imposed more than seven years after a
Premium Payment was paid. For purposes of determining the applicable Surrender
Charge, Premium Payments are considered to be withdrawn on a "first in-first
out" basis. (See "CHARGES AND DEDUCTIONS--Surrender Charge," p. 42.) After the
first Policy Year, up to 10% of the Annuity Purchase Value may be withdrawn
once per Policy Year without a Surrender Charge if it is the first withdrawal
in the Policy Year.

Account Charges. AUSA Life deducts a daily charge equal to a percentage of
the net assets in the Mutual Fund Account for the mortality and expense risks
assumed by AUSA Life. The amount of this charge depends on the Death Benefit
Option selected by the Policy Owner and the number of Policy Anniversaries
that have elapsed since the Date of Issue. For the Return of Premium Death
Benefit, the effective annual rate of this charge is 1.25% of the Mutual Fund
Account's daily net assets in the first seven Policy Years, and 1.10%
thereafter. For the Annual Step-Up Death Benefit, the corresponding charge is
1.40% in the first seven Policy Years and 1.25% thereafter. (See "CHARGES AND
DEDUCTIONS--Mortality and Expense Risk Fee," p. 43)

AUSA Life also deducts a daily Administrative Charge from the net assets of
the Mutual Fund Account to partially cover expenses incurred by AUSA Life in
connection with the administration of the Account and the Policies. The
effective annual rate of this charge is currently .15% of the Mutual Fund
Account's daily net assets in all Policy Years for both Death Benefit Options.
(See "CHARGES AND DEDUCTIONS--Administrative Charges," p. 44.)

The Administrative Charge may be increased in the future. The Mortality and
Expense Risk Fee and Administrative Charge may be increased upon commencement
of annuity payments. In no event will the total of the Mortality and Expense
Risk Fee and the Administrative Charge exceed 1.40% on or after the Annuity
Commencement Date.

Service Charge. There is an annual Service Charge deducted each year for
Policy maintenance and related administrative expenses. This charge is the
lesser of 2% of the

- 10 -
<PAGE>

Annuity Purchase Value or $35 per year, and is deducted only from the Mutual
Fund Account. The Service Charge is waived if the sum of the Premium Payments
made, less the sum of all partial withdrawals, is at least $50,000 on the
Policy Anniversary. The service charge will not be increased during the term
of the Policy. (See "CHARGES AND DEDUCTIONS--Administrative Charges," p. 44.)

Taxes. AUSA Life may incur premium taxes relating to the Policies. When
permitted by state law, AUSA Life will not deduct any premium taxes related to
a particular Policy from the Annuity Purchase Value until withdrawal of all
Annuity Purchase Value, payment of the Death Benefit, or the Annuity
Commencement Date, whichever occurs first. (See "ANNUITY PAYMENTS--Premium
Tax," p. 37.)

No charges are currently made against the Fixed Account or the Mutual Fund
Account for federal, state, or local income taxes. Should AUSA Life determine
that any such taxes may be imposed with respect to the Accounts, AUSA Life may
deduct such taxes from amounts held in the relevant Account. (See "CHARGES AND
DEDUCTIONS--Federal, State and Local Taxes," p. 44.)

Charges Against the Underlying Funds. The value of the net assets of the
Subaccounts of the Mutual Fund Account will reflect the investment advisory
fee and other expenses incurred by the Underlying Funds. Those fees and
expenses are detailed in the prospectuses for the Underlying Funds that
accompany this Prospectus.

Expense Data. The charges and deductions are summarized in the following
tables. These tables assume that the entire Annuity Purchase Value is in the
Mutual Fund Account. These tables reflect charges and expenses of the Mutual
Fund Account, as well as the Underlying Funds for the fiscal year ended
December 31, 1997, except as otherwise noted. Expenses of the Underlying Funds
may be higher or lower in the future. These tables also do not reflect any
premium taxes that may be applicable.

- 11 -
<PAGE>

FEE TABLE

<TABLE>
<S> <C>
POLICY OWNER
TRANSACTION
EXPENSES
Sales Load On
Purchase
Payments.......... 0
Maximum Surrender
Charge
(as a % of Premium
Withdrawal)(/1/)(/2/).. 7%
Surrender Fees..... 0
Annual Service $35 Per Policy,
Charge(/1/)....... but not greater
than 2% of the
Annuity Purchase
Value
Transfer Fee(/1/).. Currently No Fee
</TABLE>
<TABLE>
<S> <C>
SEPARATE ACCOUNT ANNUAL EX-
PENSES
(AS A PERCENTAGE OF ACCOUNT
VALUE)
Mortality and Expense Risk
Fees(/3/).................... 1.40%
Administrative Charge......... 0.15%
----
TOTAL SEPARATE ACCOUNT ANNUAL
EXPENSES..................... 1.55%
</TABLE>

PORTFOLIO ANNUAL EXPENSES
(as a percentage of average net assets and after expense reimbursements)

<TABLE>
<CAPTION>
TOTAL PORTFOLIO
MANAGEMENT OTHER RULE 12B-1 ANNUAL
FEES EXPENSES FEES EXPENSES(/4/)
---------- -------- ---------- ---------------
<S> <C> <C> <C> <C>
ENDEAVOR SERIES TRUST
Endeavor Money Market.......... 0.50% 0.10% -- 0.60%
Endeavor Asset Allocation...... 0.75% 0.09% -- 0.84%
T. Rowe Price International
Stock......................... 0.90% 0.17% -- 1.07%
Endeavor Value Equity.......... 0.80% 0.09% -- 0.89%
Dreyfus Small Cap Value........ 0.80% 0.11% -- 0.91%
Dreyfus U.S. Government Securi-
ties.......................... 0.65% 0.15% -- 0.80%
T. Rowe Price Equity Income.... 0.80% 0.14% -- 0.94%
T. Rowe Price Growth Stock..... 0.80% 0.16% -- 0.96%
Endeavor Opportunity Value..... 0.80% 0.35% -- 1.15%
Endeavor Enhanced Index........ 0.75% 0.55% -- 1.30%
WRL SERIES FUND, INC.(/5/)
WRL Growth..................... 0.80% 0.07% -- 0.87%
</TABLE>
- ----------------------------

(/1/)The Surrender Charge and Transfer Fee, if any is imposed, apply to each
Policy, regardless of how the Annuity Purchase Value is allocated among
the Mutual Fund Account and the Fixed Account. The annual Service Charge,
if any is imposed, applies only to the Mutual Fund Account, and is
assessed on a prorata basis relative to each Subaccount's Annuity
Purchase Value as a percentage of the Policy's total Annuity Purchase
Value. The Service Charge is deducted on each Policy Anniversary. If
applicable, a Surrender Charge will only be applied to withdrawals that
exceed the amount available under certain listed exceptions. (See
"CHARGES AND DEDUCTIONS--Other Expenses Including Investment Advisory
Fees," p. 45, and "DISTRIBUTIONS UNDER THE POLICIES--Surrender," p. 34.)
There is no Transfer Fee for the first 12 transfers per year. For
additional transfers, AUSA Life may charge a fee of $10 per transfer, but
currently does not charge for any transfers.

(/2/)The Surrender Charge is decreased based on the number of years since the
Premium Payment date in which the withdrawal is made, from 7% during the
first year after the Premium Payment was made to 0% after the seventh
year after the Premium Payment was made. (See "CHARGES AND DEDUCTIONS--
Surrender Charge," p. 42.)

(/3/)The Mortality and Expense Risk Fees shown are those for the Annual Step-
Up Death Benefit which apply during the first seven Policy Years. After
the seventh Policy Year this charge is 1.25%. The corresponding Fee for
the Return of Premium Death Benefit is 1.25% for each Subaccount during
the first seven Policy Years and 1.10% thereafter. The Administrative
Charge may be increased in the future. (See "DISTRIBUTIONS UNDER THE
POLICY--Death Benefit," p. 40.) In no event will the Mortality and
Expense Risk Fee and Administrative Charge exceed 1.40% on or after the
Annuity Commencement Date, regardless of the Death Benefit that was in
effect prior to commencement of Annuity Payments.

(/4/Endeavor)Investment Advisers has agreed, until further notice, to assume
expenses of the Portfolios that exceed the following rates: Endeavor Money
Market--0.99%; Endeavor Asset Allocation--1.25%; T. Rowe Price
International Stock--1.53%; Endeavor Value Equity--1.30%; Dreyfus Small
Cap Value--1.30%; Dreyfus U.S.

- 12 -
<PAGE>

Government Securities--1.00%; T. Rowe Price Equity Income--1.30%; T. Rowe
Price Growth Stock--1.30%; Endeavor Opportunity Value--1.30%; Endeavor
Enhanced Index--1.30%. Expenses shown for these Portfolios are estimated
for 1998. During 1997, Endeavor Investment Advisers waived fees, or
reimbursed expenses, relative to the Endeavor Enhanced Index Portfolio; the
annualized Total Underlying Funds Annual Expense of the Endeavor Enhanced
Index Portfolio before waiver/reimbursement by Endeavor Investment Advisers
for the period ended December 31, 1997, was 1.56%. The fee table
information relating to the Underlying Funds was provided to AUSA Life by
the Underlying Funds, and AUSA Life has not independently verified such
information.

(/5/)Effective January 1, 1997, the WRL Series Fund, Inc. adopted a Plan of
Distribution pursuant to Rule 12b-1 under the 1940 Act ("Distribution
Plan") and pursuant to the Distribution Plan, entered into a Distribution
Agreement with InterSecurities, Inc. ("ISI"), principal underwriter for
the WRL Series Fund, Inc. Under the Distribution Plan, the WRL Series
Fund, Inc., on behalf of the WRL Growth Portfolio, is authorized to pay
to various service providers, as direct payment for expenses incurred in
connection with the distribution of the Portfolio's shares, amounts equal
to actual expenses associated with distributing the Portfolio's shares,
up to a maximum rate of 0.15% on an annualized basis of the average daily
net assets. This fee is measured and accrued daily and paid monthly. ISI
has determined that it would not seek payment by the WRL Series Fund,
Inc. of distribution expenses with respect to any portfolio (including
the WRL Growth Portfolio) during the fiscal year ending December 31,
1998. Owners will be notified prior to the time ISI would seek such
reimbursement in the future.

- 13 -
<PAGE>

EXAMPLES

I. An Owner would pay the following expenses on a $1,000 investment,
assuming Annual Step-Up Death Benefit, a hypothetical 5% annual return on
assets, and assuming the entire Annuity Purchase Value is in the applicable
Subaccount:

1. If the Policy is surrendered at the end of the applicable time period:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Endeavor Money Market Portfolio................ $92 $114 $145 $249
Endeavor Asset Allocation Portfolio............ $95 $121 $157 $273
T. Rowe Price International Stock Portfolio.... $97 $128 $169 $296
Endeavor Value Equity Portfolio................ $95 $122 $160 $278
Dreyfus Small Cap Value Portfolio.............. $96 $123 $161 $280
Dreyfus U.S. Government Securities Portfolio... $94 $120 $155 $269
T. Rowe Price Equity Income Portfolio.......... $96 $124 $162 $283
T. Rowe Price Growth Stock Portfolio........... $96 $125 $163 $285
Endeavor Opportunity Value Portfolio........... $98 $130 $173 $304
Endeavor Enhanced Index Portfolio.............. $99 $135 $180 $318
WRL Growth Portfolio........................... $95 $122 $159 $276

2. If the Policy is annuitized at the end of the applicable time period:

<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Endeavor Money Market Portfolio................ $22 $ 69 $118 $249
Endeavor Asset Allocation Portfolio............ $25 $ 76 $130 $273
T. Rowe Price International Stock Portfolio.... $27 $ 83 $142 $296
Endeavor Value Equity Portfolio................ $25 $ 78 $133 $278
Dreyfus Small Cap Value Portfolio.............. $26 $ 78 $134 $280
Dreyfus U.S. Government Securities Portfolio... $24 $ 75 $128 $269
T. Rowe Price Equity Income Portfolio.......... $26 $ 79 $136 $283
T. Rowe Price Growth Stock Portfolio........... $26 $ 80 $136 $285
Endeavor Opportunity Value Portfolio........... $28 $ 86 $146 $304
Endeavor Enhanced Index Portfolio.............. $29 $ 90 $153 $318
WRL Growth Portfolio........................... $25 $ 77 $132 $276

3. If the Policy is not surrendered or annuitized:

- 14 -
<PAGE>

II. An Owner would pay the following expenses on a $1,000 investment,
assuming Return of Premium Death Benefit, a hypothetical 5% annual return on
assets, and assuming the entire Annuity Purchase Value is in the applicable
Subaccount:

1. If the Policy is surrendered at the end of the applicable time period:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Endeavor Money Market Portfolio................ $91 $109 $137 $233
Endeavor Asset Allocation Portfolio............ $93 $116 $150 $258
T. Rowe Price International Stock Portfolio.... $96 $123 $161 $281
Endeavor Value Equity Portfolio................ $94 $118 $152 $263
Dreyfus Small Cap Value Portfolio.............. $94 $119 $153 $265
Dreyfus U.S. Government Securities Portfolio... $93 $115 $148 $254
T. Rowe Price Equity Income Portfolio.......... $94 $119 $155 $268
T. Rowe Price Growth Stock Portfolio........... $95 $120 $156 $270
Endeavor Opportunity Value Portfolio........... $96 $126 $165 $289
Endeavor Enhanced Index Portfolio.............. $98 $130 $173 $304
WRL Growth Portfolio........................... $94 $117 $151 $261

2. If the Policy is annuitized at the end of the applicable time period:

<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Endeavor Money Market Portfolio................ $21 $ 65 $111 $233
Endeavor Asset Allocation Portfolio............ $23 $ 72 $123 $258
T. Rowe Price International Stock Portfolio.... $26 $ 79 $135 $281
Endeavor Value Equity Portfolio................ $24 $ 73 $125 $263
Dreyfus Small Cap Value Portfolio.............. $24 $ 74 $126 $265
Dreyfus U.S. Government Securities Portfolio... $23 $ 71 $121 $254
T. Rowe Price Equity Income Portfolio.......... $24 $ 75 $128 $268
T. Rowe Price Growth Stock Portfolio........... $25 $ 75 $129 $270
Endeavor Opportunity Value Portfolio........... $26 $ 81 $138 $289
Endeavor Enhanced Index Portfolio.............. $28 $ 86 $146 $304
WRL Growth Portfolio........................... $24 $ 73 $124 $261

3. If the Policy is not surrendered or annuitized:

The above tables are intended to assist the Owner in understanding the costs
and expenses that will be borne, directly or indirectly. These include the
1997 expenses of the Underlying Funds. (See "CHARGES AND DEDUCTIONS," p.42,
and the Underlying Funds' prospectuses.) In addition to the expenses listed
above, premium taxes may be applicable.

- 15 -
<PAGE>

In these examples, the $35 annual Service Charge is reflected as a charge of
.0583% based on an average Policy Value of $60,083. Normally, the $35 (but not
more than 2% of the Annuity Purchase Value) Service Charge would be waived if
the Premium Payments less partial withdrawals is at least $50,000 on a Policy
Anniversary. However, $35 has been included in these examples for illustrative
purposes.

THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN. THE
ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ANNUAL RETURNS, WHICH COULD BE GREATER OR
LESS THAN THE ASSUMED RATE. THE FIGURES AND DATA FOR THE UNDERLYING FUND
ANNUAL EXPENSES HAVE BEEN PROVIDED BY WRL INVESTMENT MANAGEMENT, INC. AND
ENDEAVOR INVESTMENT ADVISERS, AND AUSA LIFE HAS NOT INDEPENDENTLY VERIFIED
THEIR ACCURACY.

DEATH BENEFIT

If the Annuitant is also the Owner, and dies before the Annuity Commencement
Date, the Death Benefit is calculated and is payable to the Beneficiary when
AUSA Life receives due proof of death, an election of the method of settlement
and return of the Policy. The Death Benefit is only paid if the Annuitant is
also an Owner and that person dies prior to the Annuity Commencement Date. In
the event that the Annuitant who is not an Owner dies prior to the Annuity
Commencement Date, the Owner will generally become the Annuitant unless the
Owner specifically requests on the application or in writing prior to
Annuitant's death that the death benefit be paid to the Beneficiary upon the
Annuitant's death and AUSA Life agrees to such an election. Death Benefits
which are not paid to or for the benefit of a natural person must be
distributed by the end of the five years after the date of the Annuitant's
death.

AUSA Life guarantees that the Death Benefit will be at least a minimum
amount (the "Guaranteed Minimum Death Benefit") selected by the Owner, either
the "Return of Premium Death Benefit" or the "Annual Step-Up Death Benefit."
The Death Benefit will be determined on the date due proof of death and an
election of a method of settlement are received. The Death Benefit will be the
greatest of (a) the Annuity Purchase Value; or (b) the Cash Value; or (c) the
Guaranteed Minimum Death Benefit plus any additional premium payments
received, less any withdrawals from the date of death to the date of payment
of death proceeds. No Surrender Charge is imposed upon amounts received as a
Death Benefit. The Death Benefit may be paid as either a lump sum cash benefit
or as an Annuity as permitted by federal or state law. (See "DISTRIBUTIONS
UNDER THE POLICY--Death Benefit," p.40.)

The "Return of Premium Death Benefit" is equal to the total Premium Payments
made, less any Adjusted Partial Withdrawals as of the date of death.

The "Annual Step-Up Death Benefit" is equal to the largest Annuity Purchase
Value on the Date of Issue or on any Policy Anniversary prior to the earlier
of the owner's 81st birthday or the date of death, plus any Premium Payments
made less any Adjusted Partial Withdrawals taken, subsequent to the date of
the largest Annuity Purchase Value on any Policy Anniversary.

The Death Benefit is not paid on the death of an Owner if the Owner is not
the Annuitant. If an Owner who is not the Annuitant dies before the Annuity
Commencement Date, the amount payable under the Policy upon surrender will be
the Cash Value (which may include a Surrender Charge).

- 16 -
<PAGE>

The Owner has a "one-time" choice of a Guaranteed Minimum Death Benefit at
the time of purchase of the Policy. The Owner may choose either the "Annual
Step-Up Death Benefit" or the "Return of Premium Death Benefit." Certain age
restrictions may apply. If no choice is made by the Owner, the Policy will be
issued with the Return of Premium Death Benefit.

RIGHT TO RETURN THE POLICY

The Policy Owner may, until the end of the period of time specified in the
Policy, examine the Policy and return it for a refund. The applicable period
in New York is twenty days after the Policy is delivered to the Policy Owner.
The amount of refund will be the sum of all Premium Payments made under the
Policy and the accumulated gains or losses in the Mutual Fund Account, if any.
AUSA Life will pay the refund within seven days after it receives written
notice of cancellation and the returned Policy.

FEDERAL INCOME TAX CONSEQUENCES OF INVESTMENT IN THE POLICY

With respect to Owners who are natural persons, there should be no federal
income tax on increases in the Annuity Purchase Value until a distribution
under the Policy occurs (e.g., a surrender or Annuity Payment) or is deemed to
occur (e.g., a pledge or assignment of a Policy). Generally, all or a portion
of any distribution or deemed distribution will be taxable as ordinary income.
The taxable portion of certain distributions will be subject to withholding
unless the recipient elects otherwise. In addition, if the Owner is younger
than age 59 1/2, a ten percent federal penalty tax may apply to certain
distributions or deemed distributions under the Policy. (See "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES," p. 45.)

INQUIRIES, WRITTEN NOTICES AND WRITTEN REQUESTS

Any questions about procedures or the Policy, or any Written Notice or
Written Request that is required to be sent to AUSA Life, should be sent to
AUSA Life's Service Office, Financial Markets Division--Variable Annuity
Dept., 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499-0001. Inquiries may
be made by calling 800-525-6205. All inquiries, Notices and Requests should
include the Policy number, the Owner's name and the Annuitant's name.

VARIATIONS IN POLICY PROVISIONS

Certain features described in this Prospectus may only be available to
Policies purchased after the effective date of the Policy form or Endorsement
used. See the Policy or Endorsement for details.

* * *

Note: The foregoing summary is qualified in its entirety by the detailed
information in the remainder of this Prospectus, in the Statement of
Additional Information, in the prospectuses for the Underlying Funds, and in
the Policy, all of which should be referred to for more detailed information.
This Prospectus generally describes only the Policy and the Mutual Fund
Account. Separate prospectuses describe the Underlying Funds. (There is no
prospectus for the Fixed Account since interests in the Fixed Account are
deemed not to be securities. See "THE ENDEAVOR ACCOUNTS--The Fixed Account,"
p. 28.)

- 17 -
<PAGE>

CONDENSED FINANCIAL INFORMATION

The Accumulation Unit Values and the number of Accumulation Units outstanding
for each Mutual Fund Subaccount from the date of inception are shown in the
following tables.

RETURN OF PREMIUM DEATH BENEFIT

(TOTAL MUTUAL FUND ACCOUNT ANNUAL EXPENSES: 1.40%)

<TABLE>
<CAPTION>
ACCUMULATION NUMBER OF
UNIT VALUE AT ACCUMULATION ACCUMULATION
BEGINNING OF UNIT VALUE AT UNITS AT END OF
YEAR END OF YEAR YEAR
------------- ------------- ---------------
<S> <C> <C> <C>
ENDEAVOR MONEY MARKET SUBACCOUNT
1997.............................. $ 1.154219 $ 1.196418 611,981.762
1996.............................. $ 1.115718 $ 1.154219 665,174.123
1995.............................. $ 1.072424 $ 1.115718 271,034.756
ENDEAVOR ASSET ALLOCATION
SUBACCOUNT
1997.............................. $ 1.833135 $ 2.171948 1,871,808.286
1996.............................. $ 1.577873 $ 1.833135 1,123,469.170
1995.............................. $ 1.301669 $ 1.577873 607,869.454
T. ROWE PRICE INTERNATIONAL STOCK
SUBACCOUNT
1997.............................. $ 1.330640 $ 1.346560 4,334,553.810
1996.............................. $ 1.171039 $ 1.330640 2,084,832.841
1995.............................. $ 1.073958 $ 1.171039 681,093.799
ENDEAVOR VALUE EQUITY SUBACCOUNT
1997.............................. $ 1.694854 $ 2.086130 2,981,906.712
1996.............................. $ 1.387903 $ 1.694854 1,565,599.143
1995.............................. $ 1.045610 $ 1.387903 547,233.586
DREYFUS SMALL CAP VALUE SUBACCOUNT
1997.............................. $ 1.496065 $ 1.851229 2,294,637.110
1996.............................. $ 1.206843 $ 1.496065 1,239,443.264
1995.............................. $ 1.072941 $ 1.206843 535,283.029
DREYFUS U.S. GOVERNMENT SECURITIES
SUBACCOUNT
1997.............................. $ 1.128769 $ 1.215033 1,093,934.793
1996.............................. $ 1.124292 $ 1.128769 589,779.900
1995(/1/)......................... $ 0.985803 $ 1.124292 204,813.593
T. ROWE PRICE EQUITY INCOME
SUBACCOUNT
1997.............................. $ 1.521680 $ 1.925022 2,982,510.532
1996.............................. $ 1.287240 $ 1.521680 1,387,607,312
1995(/2/)......................... $ 1.000000 $ 1.287240 293,619.530
T. ROWE PRICE GROWTH STOCK
SUBACCOUNT
1997.............................. $ 1.611613 $ 2.04348 1,925,118.021
1996.............................. $ 1.353339 $ 1.611613 964,658.085
1995(/3/)......................... $ 1.000000 $ 1.353339 189,613.999
ENDEAVOR OPPORTUNITY VALUE
SUBACCOUNT
1997.............................. $ 1.004355 $ 1.156993 869,832.105
1996(/4/)......................... $ 1.000000 $ 1.004355 178,913.412
ENDEAVOR ENHANCED INDEX SUBACCOUNT
1997(/5/)......................... $ 1.000000 $ 1.217647 422,227.210
WRL GROWTH SUBACCOUNT
1997.............................. $16.964068 $19.665157 557,897.978
1996.............................. $14.583843 $16.964068 306,855.075
1995.............................. $10.051117 $14.583843 97,436.321
</TABLE>

- 18 -
<PAGE>

II. For year ending December 31, 1997, there were no sales of the Policy for
the Annual Step-Up Death Benefit (Total Mutual Fund Account Annual Expenses:
1.55%), therefore, there is no Condensed Financial Information to report for
these Policies.
- ----------------------------

(/1/Period)from June 16, 1995 through December 31, 1995

(/2/Period)from June 28, 1995 through December 31, 1995

(/3/Period)from April 28, 1995 through December 31, 1995

(/4/Period)from December 13, 1996 through December 31, 1996.

(/5/Period)from May 1, 1997 through December 31, 1997.

FINANCIAL STATEMENTS

The financial statements of the Mutual Fund Account and of AUSA Life, and
the independent auditors' reports thereon are found in the Statement of
Additional Information which is available free upon request from the Service
Office at (800) 525-6205 (toll-free).

- 19 -
<PAGE>

HISTORICAL PERFORMANCE DATA

STANDARDIZED PERFORMANCE DATA

From time to time, AUSA Life may advertise historical yields and total
returns for the Subaccounts of the Mutual Fund Account. In addition, AUSA Life
may advertise the effective yield of the Subaccount investing in the Endeavor
Money Market Portfolio (the "Endeavor Money Market Subaccount"). These figures
will be calculated according to standardized methods prescribed by the SEC.
These yields and total returns will be based on historical earnings and are
not intended to indicate future performance.

Endeavor Money Market Subaccount. The yield of the Endeavor Money Market
Subaccount for a Policy refers to the annualized income generated by an
investment under a Policy in the Subaccount over a specified seven-day period.
The yield is calculated by assuming that the income generated for that seven-
day period is generated each seven-day period over a 52-week period and is
shown as a percentage of the investment. The effective yield is calculated
similarly but, when annualized, the income earned by an investment under a
Policy in the Subaccount is assumed to be reinvested. The effective yield will
be slightly higher than the yield because of the compounding effect of this
assumed reinvestment. For the seven days ended December 31, 1997, the yield of
the Endeavor Money Market Subaccount was 3.182%, and the effective yield was
3.232%.

Other Subaccounts. The yield of a Subaccount of the Mutual Fund Account
(other than the Endeavor Money Market Subaccount) for a Policy refers to the
annualized income generated by an investment under a Policy in the Subaccount
over a specified thirty-day period. The yield is calculated by assuming that
the income generated by the investment during that thirty-day period is
generated each thirty-day period over a 12-month period and is shown as a
percentage of the investment.

The total return of a Subaccount of the Mutual Fund Account refers to return
quotations assuming an investment under a Policy has been held in the
Subaccount for various periods of time including a period measured from the
date the Subaccount commenced operations. When a Subaccount has been in
operation for one, five, and ten years, respectively, the total return for
these periods will be provided. The total return quotations for a Subaccount
will represent the average annual compounded rates of return that equate an
initial investment of $1,000 in the Subaccount to the redemption value of that
investment as of the first day of each of the periods for which total return
quotations are provided. In addition to the standard data discussed above,
similar performance data for other periods may also be shown.

The yield and total return calculations for a Subaccount do not reflect the
effect of any premium taxes that may be applicable to a particular Policy. The
yield calculations also do not reflect the effect of any Surrender Charge that
may be applicable to a particular Policy. To the extent that a premium tax
and/or Surrender Charge is applicable to a particular Policy, the yield and/or
total return of that Policy will be reduced. For additional information
regarding yields and total returns calculated using the standard formats
briefly summarized above, please refer to the Statement of Additional
Information, a copy of which may be obtained from the Service Office of AUSA
Life upon request.

Based on the method of calculation described in the Statement of Additional
Information, (that is, deducting the Mortality and Expense Risk Fee,
Administrative Charge and Surrender Charge under the Policy) the average
annual total returns for periods from inception of the Subaccounts to December
31, 1997, and for the one and five year periods ended December 31, 1997, are
shown below. Total returns shown reflect deductions for the Mortality and
Expense Risk Fee and Administrative Charges. Total return calculations will
reflect the effect of Surrender Charges that may be applicable to a particular
period. Such data assumes a complete surrender of the Policy at the end of the
period; therefore the Surrender Charge is deducted.

- 20 -
<PAGE>

AVERAGE ANNUAL TOTAL RETURNS(/1/)

Return of Premium Death Benefit
(Total Mutual Fund Account Annual Expenses: 1.40%)

Annual Step-Up Death Benefit
(Total Mutual Fund Account Annual Expenses: 1.55%)

<TABLE>
<CAPTION>
ONE YEAR INCEPTION
PERIOD FIVE YEARS OF THE SUBACCOUNT
ENDED ENDED SUBACCOUNT TO INCEPTION
SUBACCOUNT 12/31/97 12/31/97 12/31/97 DATE
- ---------- -------- ---------- ------------- -----------------
<S> <C> <C> <C> <C>
Endeavor Asset Alloca-
tion.................... 12.96% N/A 17.55% January 1, 1995
T. Rowe Price Interna-
tional Stock............ (4.39%) N/A 6.59% January 1, 1995
Endeavor Value Equity.... 17.59% N/A 24.93% January 1, 1995
Dreyfus Small Cap Value.. 18.24% N/A 18.90% January 1, 1995
Dreyfus U.S. Government
Securities.............. 2.08% N/A 3.19% June 16, 1995
T. Rowe Price Equity In-
come.................... 21.02% N/A 22.77% June 28, 1995
T. Rowe Price Growth
Stock................... 21.31% N/A 22.55% April 28, 1995
Endeavor Opportunity Val-
ue...................... 9.79% N/A 9.89% December 13, 1996
Endeavor Enhanced Index.. N/A N/A 14.66% May 1, 1997
WRL Growth............... 10.39% N/A 24.10% January 1, 1995
</TABLE>
- ----------------------------
(/1/These)calculations also assume the Policy has been in effect for less than
eight years and that Annuity Payments have not commenced. Policies in
effect for more than seven years would experience lower Mortality and
Expense Risk Fees and therefore the yield and/or total return of such
Policies would be increased. In no event will Policies which have reached
the Annuity Commencement Date reflect a return based on a Mortality and
Expense Risk Fee and Administrative Charge of more than 1.40%, regardless
of the death benefit option in effect just prior to the commencement of
Annuity Payments.

The figures for the "from inception" periods in the above tables reflect
waiver of advisory fees and reimbursement of other expenses for all portfolios
except the T. Rowe Price Equity Income Portfolio and the T. Rowe Price Growth
Stock Portfolio. In the absence of such waivers, the average annual total
return figures above for the inception periods would have been lower.

NON-STANDARDIZED PERFORMANCE DATA

AUSA Life may present the total return data described above on a non-
standardized basis. This means that the data may not be reduced by all the
fees and charges under the Policy and that the data may be presented for
different time periods and for different Premium Payment amounts. NON-
STANDARDIZED PERFORMANCE DATA WILL ONLY BE DISCLOSED IF STANDARDIZED
PERFORMANCE DATA FOR THE REQUIRED PERIODS IS ALSO DISCLOSED. THE FOLLOWING
TABLES SHOW AVERAGE ANNUAL TOTAL RETURNS OF THE SUBACCOUNTS SINCE THEIR
INCEPTION REDUCE BY ALL FEES AND CHARGES UNDER THE POLICY EXCEPT SURRENDER
CHARGES:

- 21 -
<PAGE>

AVERAGE ANNUAL TOTAL RETURNS(/1/)

(ASSUMING NO SURRENDER CHARGE)

Return of Premium Death Benefit
(Total Mutual Fund Account Annual Expenses: 1.40%)

Annual Step-Up Death Benefit
(Total Mutual Fund Account Annual Expenses: 1.55%)

(/1/)These calculations also assume the Policy has been in effect for less than
eight years and that Annuity Payments have not commenced. Policies in
effect for more than seven years would experience lower Mortality and
Expense Risk Fees and therefore the yield and/or total return of such
Policies would be increased. In no event will Policies which have reached
the Annuity Commencement Date reflect a return based on a Mortality and
Expense Risk Fee and Administrative Charge of more than 1.40%, regardless
of the death benefit option in effect just prior to the commencement of
Annuity Payments.

Adjusted Historical Performance Data. In addition, AUSA Life may present
historic performance data for the underlying Portfolios since their inception
reduced by some or all of the fees and charges under the Policy. Such adjusted
historic performance includes data that precedes the inception dates of the
Subaccounts. This data is designed to show the performance that would have
resulted if the Policy had been in existence during that time.

For instance, as shown in the table below, AUSA Life may disclose average
annual total returns for the Portfolios reduced by all fees and charges under
the Policy, as if the Policy had been in existence since the inception of the
Portfolio. Such fees and charges include the Mortality and Expense Risk Fee,
Administrative Charge and Surrender Charges. Such data

- 22 -
<PAGE>

assumes a complete surrender of the Policy at the end of the period; THEREFORE
THE SURRENDER CHARGE IS DEDUCTED.

The following information is based on the method of calculation described in
the Statement of Additional Information. The adjusted historical average
annual total returns for periods ended December 31, 1997, were as follows:

ADJUSTED HISTORICAL AVERAGE ANNUAL TOTAL RETURNS(/1/)

Return of Premium Death Benefit

(Total Mutual Fund Account Annual Expenses: 1.40%)

Annual Step-Up Death Benefit
(Total Mutual Fund Account Annual Expenses: 1.55%)

<TABLE>
<CAPTION>
CORRESPONDING
TEN YEARS* PORTFOLIO
OR PORTFOLIO INCEPTION
SUBACCOUNT FIVE YEARS INCEPTION DATE
- ---------- ---------- ------------ -----------------
<S> <C> <C> <C>
Endeavor Asset Allocation........... 11.97% 11.85% April 8, 1991
T. Rowe Price International
Stock(/2/)......................... 5.85% 4.10% April 8, 1991
Endeavor Value Equity............... N/A 16.70% May 27, 1993
Dreyfus Small Cap Value............. N/A 13.45% May 4, 1994
Dreyfus U.S. Government Securities.. N/A 4.24% May 9, 1994
T. Rowe Price Equity Income......... N/A 23.14% January 3, 1995
T. Rowe Price Growth Stock.......... N/A 25.70% January 3, 1995
Endeavor Opportunity Value.......... N/A 9.16% November 18, 1996
Endeavor Enhanced Index............. N/A 14.66% May 1, 1997
WRL Growth.......................... 12.21% 16.74%* October 2, 1986
</TABLE>
- ----------------------------
(/1/)The calculation of total return performance for periods prior to inception
of the Subaccounts reflects deductions for the Mortality and Expense Risk
Fee and Administrative Charge on a monthly basis, rather than a daily
basis. The monthly deduction is made at the beginning of each month and
generally approximates the performance that would have resulted if the
Subaccounts had actually been in existence since the Inception of the
Portfolio.

(/2/)Effective January 1, 1995, Rowe-Price Fleming International, Inc. became
the Adviser to the T. Rowe Price International Stock Portfolio. The
Portfolio's name was changed from the Global Growth Portfolio and the
Portfolio's shareholders approved a change in investment objective from
investments in small capitalization companies on a global basis to
investments in a broad range of companies on an international basis (i.e.,
non-U.S. companies).

The figures for the "five year" and "from inception" periods in the above
tables reflect waiver of advisory fees and reimbursement of other expenses for
all portfolios except the T. Rowe Price Equity Income Portfolio and the T.
Rowe Price Growth Stock Portfolio. In the absence of such waivers, the average
annual total return figures above from the five year and from inception
periods would have been lower.

- 23 -
<PAGE>

In addition, as shown in the next tables, AUSA Life may present average
annual total returns for the Portfolios reduced by all fees and charges under
the Policy, as if the Policy had been in existence, EXCEPT THAT THE SURRENDER
CHARGE IS NOT IMPOSED. Such fees and charges include the Mortality and Expense
Risk Fee and the Administrative Charge.

ADJUSTED HISTORICAL AVERAGE ANNUAL TOTAL RETURNS(/1/)

(ASSUMING NO SURRENDER CHARGE)

Return of Premium Death Benefit
(Total Mutual Fund Account Annual Expenses: 1.40%)

Annual Step-Up Death Benefit
(Total Mutual Fund Account Annual Expenses: 1.55%)

<TABLE>
<CAPTION>
CORRESPONDING
TEN YEARS* PORTFOLIO
FIVE OR PORTFOLIO INCEPTION
SUBACCOUNT YEARS INCEPTION DATE
- ---------- ----- ------------ -----------------
<S> <C> <C> <C>
Endeavor Asset Allocation................ 12.18% 11.97% April 8, 1991
T. Rowe Price International Stock(/2/)... 6.13% 4.30% April 8, 1991
Endeavor Value Equity.................... N/A 17.10% May 27, 1993
Dreyfus Small Cap Value.................. N/A 13.89% May 4, 1994
Dreyfus U.S. Government Securities....... N/A 5.31% May 9, 1994
T. Rowe Price Equity Income.............. N/A 24.20% January 3, 1995
T. Rowe Price Growth Stock............... N/A 26.70% January 3, 1995
Endeavor Opportunity Value............... N/A 13.84% November 18, 1996
Endeavor Enhanced Index.................. N/A 21.66% May 1, 1997
WRL Growth............................... 12.41% 16.74%* October 2, 1986
</TABLE>
- ----------------------------
(/1/)The calculation of total return performance for periods prior to inception
of the Subaccounts reflects deductions for the Mortality and Expense Risk
Fee and Administrative Charge on a monthly basis, rather than a daily
basis. The monthly deduction is made at the beginning of each month and
generally approximates the performance that would have resulted if the
Subaccounts had actually been in existence since the Inception of the
Portfolio.

- 24 -
<PAGE>

PUBLISHED RATINGS

AUSA Life may from time to time publish in advertisements, sales literature
and reports to Owners, the ratings and other information assigned to it by one
or more independent rating organizations such as A.M. Best Company, Standard &
Poor's Insurance Ratings Services, Moody's Investors Service, Inc. and Duff &
Phelps Credit Rating Co. The purpose of the ratings is to reflect the
financial strength and/or claims-paying ability of AUSA Life and should not be
considered as bearing on the investment performance of assets held in the
Mutual Fund Account or of the safety or riskiness of an investment in the
Mutual Fund Account. Each year the A.M. Best Company reviews the financial
status of thousands of insurers, culminating in the assignment of Best's
ratings. These ratings reflect their current opinion of the relative financial
strength and operating performance of an insurance company in comparison to
the norms of the life/health insurance industry. In addition, the claims-
paying ability of AUSA Life as measured by Standard & Poor's Insurance Ratings
Services, Moody's Investors Service, Inc. or Duff & Phelps Credit Rating Co.
may be referred to in advertisements or sales literature or in reports to
Owners. These ratings are opinions of an operating insurance company's
financial capacity to meet the obligations of its insurance policies in
accordance with their terms. Claims-paying ability ratings do not refer to an
insurer's ability to meet non-policy obligations (i.e., debt/commercial
paper). These ratings do not reflect the investment performance of the Mutual
Fund Account or Fixed Account or the degree of risk associated with an
investment in either account.

AUSA LIFE INSURANCE COMPANY, INC.

AUSA Life Insurance Company, Inc. is a stock life insurance company. It was
incorporated under the laws of the State of New York on October 3, 1947. It is
principally engaged in the sale of life insurance and annuity policies, and is
licensed in the District of Columbia, and in all states except Alabama and
Hawaii. As of December 31, 1997, AUSA Life had assets of approximately $9.9
billion. AUSA Life is a wholly-owned indirect subsidiary of AEGON USA, Inc.,
which conducts substantially all of its operations through subsidiary
companies engaged in the insurance business or in providing non-insurance
financial services. All of the stock of AEGON USA, Inc. is indirectly owned by
AEGON n.v. of the Netherlands. AEGON n.v., a holding company, conducts its
business through subsidiary companies engaged primarily in the insurance
business.

THE ENDEAVOR ACCOUNTS

Premium Payments made under a Policy may be allocated to the Mutual Fund
Account, to the Fixed Account, or to a combination of these Accounts.

The AUSA Endeavor Variable Annuity Account of AUSA Life (the "Mutual Fund
Account") was established as a separate investment account under the laws of
the State of New York on September 27, 1994.

THE MUTUAL FUND ACCOUNT

The Mutual Fund Account is registered with the SEC under the 1940 Act as a
unit investment trust and meets the definition of a separate account under
federal securities laws. However, the SEC does not supervise the management or
the investment practices or policies of the Mutual Fund Account or AUSA Life.

The Mutual Fund Account was created due to the assumption of certain
policies of AUSA Life's former affiliate, International Life Investors
Insurance Company ("ILI"). The ILI policies were transferred to allow AUSA
Life to succeed to the variable annuity business of

- 25 -
<PAGE>

ILI. The Mutual Fund Account currently receives and invests the Premium
Payments under the Policies that are allocated to it for investment in shares
of certain management investment companies. The shares available to be
allocated under the Policy are those of the WRL Growth Portfolio of the WRL
Series Fund, Inc. and designated portfolios of the Endeavor Series Trust.

The Mutual Fund Account currently has dedicated eleven Subaccounts to the
Policy. Additional Subaccounts may be established, or Subaccounts may be
removed, in the future at the discretion of AUSA Life subject to applicable
law. Each Subaccount invests exclusively in shares of one of the Portfolios of
the Underlying Funds. Under New York law, the assets of the Mutual Fund
Account are owned by AUSA Life, but they are held separately from the other
assets of AUSA Life, and are not chargeable with liabilities incurred in any
other business operation of AUSA Life (except to the extent that assets in the
Mutual Fund Account exceed the reserves and other liabilities of the Mutual
Fund Account). Income, gains, and losses incurred on the assets in the
Subaccounts of the Mutual Fund Account, whether or not realized, are credited
to or charged against that Subaccount without regard to other income, gains or
losses of any other Account or Subaccount of AUSA Life. Therefore, the
investment performance of any Subaccount should be entirely independent of the
investment performance of AUSA Life's general account assets or any other
Account or Subaccount maintained by AUSA Life.

The Underlying Funds. The Mutual Fund Account will invest in shares of
Endeavor Series Trust and the WRL Growth Portfolio of the WRL Series Fund,
Inc. (collectively the "Underlying Funds"). The WRL Series Fund, Inc. and the
Endeavor Series Trust are each a series-type mutual fund registered with the
SEC under the 1940 Act as an open-end, diversified management investment
company. The registration of the Underlying Funds does not involve supervision
of the management or investment practices or policies of the Underlying Funds
by the SEC.

The following Portfolios are currently available in the Mutual Fund Account
under the Policies:

Endeavor Asset Allocation Portfolio Dreyfus U.S. Government Securities
Portfolio

Endeavor Money Market Portfolio Endeavor Value Equity Portfolio

T. Rowe Price International Stock Endeavor Opportunity Value Portfolio
Portfolio

T. Rowe Price Equity Income Endeavor Enhanced Index Portfolio
Portfolio
WRL Growth Portfolio

T. Rowe Price Growth Stock Portfolio

Dreyfus Small Cap Value Portfolio

The assets of each Portfolio are held separate from the assets of the other
Portfolios, and each Portfolio has its own distinct investment objectives and
policies. Each Portfolio operates as a separate investment fund, and the
income or losses of one Portfolio generally have no effect on the investment
performance of any other Portfolio.

Endeavor Investment Advisers, an investment adviser registered with the SEC
under the Investment Advisers Act of 1940, is the Endeavor Series Trust's
manager. Endeavor Investment Advisers is a general partnership of which
Endeavor Management Co. is the managing partner. Endeavor Management Co. holds
a 50.01% interest in Endeavor Investment Advisers. AUSA Financial Markets,
Inc., an affiliate of AUSA Life, holds the remaining 49.99% interest.

Endeavor Investment Advisers selects and contracts with advisers for
investment services for the Portfolios of Endeavor Series Trust, reviews the
advisers' activities, and otherwise performs administerial and managerial
functions for the Endeavor Series Trust. The following six advisers each
perform investment advisory services for particular Portfolios of Endeavor
Series Trust, (the "Advisers").

- 26 -
<PAGE>

MORGAN STANLEY ASSET MANAGEMENT INC. (a subsidiary of Morgan Stanley, Dean
Witter, Discover & Co.)

T. ROWE PRICE ASSOCIATES, INC.

ROWE PRICE-FLEMING INTERNATIONAL, INC. (a joint venture between T. Rowe Price
Associates, Inc. and Robert Fleming Holdings Limited)

OPCAP ADVISORS (an affiliate of PIMCO Advisers, L.P.)

J.P. MORGAN INVESTMENT MANAGEMENT INC. (a wholly owned subsidiary of J.P.
Morgan and Co. Incorporated)

THE DREYFUS CORPORATION (a wholly-owned subsidiary of Mellon Bank, N.A.)

Morgan Stanley Asset Management Inc. is the Adviser for the Endeavor Asset
Allocation Portfolio and the Endeavor Money Market Portfolio. Prior to May 1,
1998, TCW Funds Management, Inc. was the Adviser to the Endeavor Money Market
Portfolio and the Endeavor Asset Allocation Portfolio. T. Rowe Price
Associates, Inc. is the Adviser for the T. Rowe Price Equity Income Portfolio
and the T. Rowe Price Growth Stock Portfolio. Rowe Price-Fleming
International, Inc. is the Adviser for the T. Rowe Price International Stock
Portfolio. OpCap Advisors (formerly known as Quest for Value Advisors) is the
Adviser for the Endeavor Value Equity Portfolio and the Endeavor Opportunity
Value Portfolio. J.P. Morgan Investment Management Inc. is the Adviser for the
Endeavor Enhanced Index Portfolio. The Dreyfus Corporation is the Adviser for
the Dreyfus U.S. Government Securities Portfolio, and the Dreyfus Small Cap
Value Portfolio.

WRL Investment Management, Inc., a subsidiary of Western Reserve Life
Assurance Co. of Ohio, (an affiliate of AUSA Life), is the Adviser for the WRL
Series Fund, Inc. and contracts with Janus Capital Corporation (also an
"Adviser") as a sub-adviser to the WRL Growth Portfolio.

The Adviser of a Portfolio is responsible for selecting the investments of
the Portfolio consistent with the investment objectives and policies of the
Portfolio, and will conduct securities trading for the Portfolio. All Advisers
are investment advisers registered with the SEC under the Investment Advisers
Act of 1940. The investment objectives of each Portfolio are summarized as
follows:

Endeavor Money Market Portfolio (formerly, TCW Money Market Portfolio)--
seeks current income, preservation of capital and maintenance of liquidity
through investment in short-term money market securities. The Portfolio seeks
to maintain a constant net asset value of $1.00 per share although no
assurances can be given that such constant net asset value will be maintained.

Endeavor Asset Allocation Portfolio (formerly, TCW Managed Asset Allocation
Portfolio)--seeks high total return through a managed asset allocation
portfolio of equity, fixed income and money market securities.

T. Rowe Price International Stock Portfolio--seeks long-term growth of
capital through investments primarily in common stocks of established non-U.S.
companies.

Endeavor Value Equity Portfolio (formerly, Value Equity Portfolio)--seeks
long-term capital appreciation through investment in securities (primarily
equity securities) of companies that are believed by the Portfolio's Adviser
to be undervalued in the marketplace in relation to factors such as the
companies' assets or earnings.

Dreyfus Small Cap Value Portfolio--seeks capital appreciation through
investments in a diversified portfolio consisting primarily of equity
securities of companies with a median

- 27 -
<PAGE>

capitalization of approximately $750 million, provided that under normal
market conditions at least 75% of the Portfolio's investments will be in
equity securities of companies with capitalizations at the time of purchase
between $150 million and $1.5 billion.

Dreyfus U.S. Government Securities Portfolio--seeks as high a level of total
return as is consistent with prudent investment strategies by investing under
normal conditions at least 65% of its assets in debt obligations and mortgage-
backed securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.

T. Rowe Price Equity Income Portfolio--seeks to provide substantial dividend
income and also capital appreciation by investing primarily in dividend paying
stocks of established companies.

T. Rowe Price Growth Stock Portfolio--seeks long-term growth of capital and
to increase dividend income through investment primarily in common stocks of
well established growth companies.

Endeavor Opportunity Value Portfolio (formerly, Opportunity Value
Portfolio)--seeks growth of capital over time through investment in a
portfolio consisting of common stocks, bonds and cash equivalents, the
percentages of which will vary based upon the Portfolio Adviser's assessment
of relative values.

Endeavor Enhanced Index Portfolio (formerly, Enhanced Index Portfolio)--
seeks to earn a total return modestly in excess of the total return
performance of the Standard & Poor's 500 Composite Stock Index (the "S&P 500
Index") while maintaining a volatility of return similar to the S&P 500 Index.

WRL Growth Portfolio--seeks growth of capital. At most times, this Portfolio
will be invested primarily in equity securities which are selected solely for
their capital growth potential; investment income is not a consideration.

AUSA Life may from time to time receive revenue or fees from the Underlying
Funds or their advisers or sub-advisers. The amount of the fees, if any, may
be based on the amount of assets that AUSA Life or the Mutual Fund Account
invests in the Underlying Funds.

THERE IS NO ASSURANCE THAT ANY PORTFOLIO WILL ACHIEVE ITS STATED OBJECTIVE.
MORE DETAILED INFORMATION, INCLUDING A DESCRIPTION OF EACH PORTFOLIO'S
INVESTMENT OBJECTIVE AND POLICIES AND A DESCRIPTION OF RISKS INVOLVED IN
INVESTING IN EACH OF THE PORTFOLIOS AND OF EACH PORTFOLIO'S FEES AND EXPENSES
IS CONTAINED IN THE PROSPECTUSES FOR THE UNDERLYING FUNDS, CURRENT COPIES OF
WHICH ARE ATTACHED TO THIS PROSPECTUS. INFORMATION CONTAINED IN THE UNDERLYING
FUNDS' PROSPECTUSES SHOULD BE READ CAREFULLY BEFORE INVESTING IN A SUBACCOUNT
OF THE MUTUAL FUND ACCOUNT.

An investment in the Mutual Fund Account, or in any Portfolio, including the
Endeavor Money Market Portfolio and the Dreyfus U.S. Government Securities
Portfolio, is not insured or guaranteed by the U.S. government or any
government agency.

Addition, Deletion, or Substitution of Investments. AUSA Life cannot and
does not guarantee that any of the Portfolios will always be available for
Premium Payments, allocations, or transfers. AUSA Life retains the right, with
prior approval of the New York Insurance Superintendent, to make changes in
the Mutual Fund Account and its investments. AUSA Life reserves the right to
eliminate the shares of any Portfolio held by a Subaccount and to substitute
shares of another Portfolio of the Underlying Funds, or of another registered
open-end management investment company for the shares of any Portfolio, if the
shares of the Portfolio are no longer available for investment or if, in AUSA
Life's judgment,

- 28 -
<PAGE>

investment in any Portfolio would be inappropriate in view of the purposes of
the Mutual Fund Account. To the extent required by the 1940 Act, substitutions
of shares attributable to an Owner's interest in a Subaccount will not be made
without prior notice to the Owner and the prior approval of the SEC. Nothing
contained in this Prospectus prevents the Mutual Fund Account from purchasing
other securities for other series or classes of variable annuity policies, or
from effecting an exchange between series or classes of variable annuity
policies on the basis of requests made by Owners.

New Subaccounts may be established when, in the sole discretion of AUSA
Life, marketing, tax, investment or other conditions warrant. Any new
Subaccounts may be made available to existing Owners on a basis to be
determined by AUSA Life. Each additional Subaccount will purchase shares in a
mutual fund portfolio or other investment vehicle. AUSA Life may also
eliminate one or more Subaccounts if, in its sole discretion, marketing, tax,
investment or other conditions warrant such change. AUSA Life may receive
expense reimbursements or other revenues from the Underlying Funds, their
portfolios, or their investment advisers.

In the event any Subaccount is eliminated, AUSA Life will notify Owners and
request a reallocation of the amounts invested in the eliminated Subaccount.
If no such reallocation is provided by the Owner, AUSA Life will reinvest the
amounts invested in the eliminated Subaccount in the Subaccount that invests
in the Endeavor Money Market Portfolio (or in a similar portfolio of money
market instruments) or in another Subaccount, if appropriate.

In the event of any such substitution or change, AUSA Life may, by
appropriate endorsement, make such changes in the Policies as may be necessary
or appropriate to reflect such substitution or change. Furthermore, if deemed
to be in the best interests of persons having voting rights under the
Policies, the Mutual Fund Account may be (i) operated as a management company
under the 1940 Act or any other form permitted by law, (ii) deregistered under
the 1940 Act in the event such registration is no longer required or (iii)
combined with one or more other separate accounts. To the extent permitted by
applicable law, AUSA Life also may transfer the assets of the Mutual Fund
Account associated with the Policies to another account or accounts.

THE FIXED ACCOUNT

This Prospectus is generally intended to serve as a disclosure document only
for the Policy and the Mutual Fund Account. For complete details regarding the
Fixed Account, see the Policy itself.

Premium Payments allocated and amounts transferred to the Fixed Account
become part of the general account of AUSA Life, which supports insurance and
annuity obligations. Interests in the general account have not been registered
under the Securities Act of 1933 (the "1933 Act"), nor is the general account
registered as an investment company under the 1940 Act. Accordingly, neither
the general account nor any interests therein are generally subject to the
provisions of the 1933 or 1940 Acts and AUSA Life has been advised that the
staff of the SEC has not reviewed the disclosures in this Prospectus which
relate to the fixed portion.

The Policy Owner may allocate Premium Payments to the Fixed Account at the
time of Premium Payment or by subsequent transfers from the Mutual Fund
Account. Instead of the Policy Owner bearing the investment risk, as is the
case for Annuity Purchase Value in the Mutual Fund Account, AUSA Life bears
the full investment risk for all Annuity Purchase Value in the Fixed Account.
AUSA Life has sole discretion to invest the assets of its general account,
including the Fixed Account, subject to applicable law. All guaranteed rates
or benefits provided by AUSA Life are subject to AUSA Life's claims-paying
ability.

- 29 -
<PAGE>

Premium Payments applied to and any amounts transferred to the Fixed Account
will reflect a fixed interest rate. The interest rates AUSA Life sets will be
credited for increments of at least one year measured from each premium
payment or transfer date. These rates will never be less than an effective
annual interest rate of 3% during the term of a Policy.

Guaranteed Period. AUSA Life will offer a one year guaranteed interest rate
period ("Guaranteed Period Option" or "GPO") into which Premium Payments may
be paid or amounts transferred. The current effective annual interest rate
AUSA Life sets for funds entering the One Year Guaranteed Period Option will
be guaranteed until the end of the Guaranteed Period Option. At the end of the
Guaranteed Period, the Premium Payment or amount transferred into the
Guaranteed Period Option less any withdrawals or transfers from that Option,
including the effect of any Surrender Charge due to withdrawals prior to the
end of the Guaranteed Period, plus accrued interest, will be rolled into a new
Guaranteed Period Option, unless the Owner requests otherwise.

AUSA Life will mail a preliminary notice to the Owner at least 45 days prior
to the end of a Guaranteed Period, which will indicate the alternatives that
are available to the Owner at the end of the Guaranteed Period, including the
new interest rate, (or if the new rate has not yet been determined, the rate
currently in effect). The Policy Owner may choose from among the available
alternatives by giving AUSA Life a written election within 30 days before the
end of the expiring Guaranteed Period. If the Owner does not make an election,
funds will be rolled into the new One Year Guaranteed Period Option, and the
Owner will be mailed a notice of the completion of the rollover with the new
interest rate. AUSA Life will deem the new Guaranteed Period Option to be
accepted by the Owner if AUSA Life does not receive a written rejection from
the Owner within 30 days after the completion notice.

Upon full surrender, the Owner is guaranteed return of Premium Payments to
the Fixed Account, less partial withdrawals and transfers from the Fixed
Account.

For purposes of crediting interest, the oldest Premium Payment or transfer
into the One Year Guaranteed Period Option within the Fixed Account, plus
interest allocable to that Premium Payment or transfer, is considered to be
withdrawn or transferred out first; the next oldest Premium Payment plus
interest is considered to be transferred out next, and so on (this is a
"first-in, first-out" procedure). (See "THE ENDEAVOR ACCOUNTS--Transfers,"
p. 30.)

Dollar Cost Averaging Fixed Account Option. AUSA Life may offer a Dollar
Cost Averaging Fixed Account Option separate from the One Year Guaranteed
Period Option. This option will generally have a one-year interest rate
guarantee for amounts in the DCA Fixed Account and will only be available
under a Dollar Cost Averaging (DCA) program (see "Dollar Cost Averaging" p.
31.) If the Owner, for any reason, discontinues the DCA program before its
completion, then the interest credited on amounts in the DCA account may be
adjusted downward, but not below the minimum guaranteed effective annual
interest rate of 3%. The Current Interest Rate AUSA Life sets for the Dollar
Cost Averaging Fixed Account may differ from the rates credited on the One
Year Guaranteed Period Option in the Fixed Account. The credited interest rate
will never be less than the minimum annual effective interest rate of 3%. The
Dollar Cost Averaging Fixed Account Option will only be available under a
Dollar Cost Averaging program as described below. AUSA Life may credit
different interest rates for DCA programs of varying time periods. Interest
credited on the amounts in the DCA Fixed Account will always be at least an
annual effective rate of 3%.

Prior to the Annuity Commencement Date, no transfers, except through DCA,
will be allowed from the DCA Fixed Account. DCA transfers must begin within 30
days after the Premium Payment or transfer to the DCA Fixed Account. Transfers
must be scheduled for at least six but not more than 24 months, or for at
least four, but not more than eight quarters. Transfers will continue until
the elected Subaccount or DCA Fixed Account value is depleted. The amount
transferred each time must be at least $500. All transfers from the DCA
account will be the same amount as the initial transfer unless subsequently
changed.

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Changes to the amount transferred will only be allowed after the minimums are
satisfied or when additional premium is allocated or a new amount is
transferred into the DCA account. If the amount transferred is changed, the
minimums must be met again (that is, transfers must be scheduled for at least
six more but not more than 24 months, or for at least four more, but not more
than eight quarters). Changes can be made to the Subaccounts to which these
transfers are allocated. Dollar Cost Averaging transfers from the Dollar Cost
Averaging Fixed Account will not be subject to an Excess Interest Adjustment.

Current Interest Rates. AUSA Life periodically will establish an applicable
Current Interest Rate for the One Year Guaranteed Period Option within the
Fixed Account, and the Dollar Cost Averaging Fixed Account Option. Current
Interest Rates may be changed by AUSA Life frequently or infrequently
depending on interest rates on investments available to AUSA Life and other
factors as described below, but once established, the rate will be guaranteed
for the entire duration of the Guaranteed Period.

The Current Interest Rate will not be less than an effective annual interest
rate of 3%. AUSA Life has no specific formula for determining the rate of
interest that it will declare as a Current Interest Rate, as this rate will be
reflective of interest rates available on the types of debt instruments in
which AUSA Life intends to invest amounts allocated to the Fixed Account. In
addition, AUSA Life's management may consider other factors in determining
Current Interest Rates for a Guaranteed Period including but not limited to:
regulatory and tax requirements; sales commissions and administrative expenses
borne by the Company; general economic trends; and competitive factors. There
is no obligation to declare a rate in excess of 3%; the Policy Owner assumes
the risk that declared rates will not exceed 3%. AUSA Life has complete
discretion to declare any rate of at least 3%, regardless of market interest
rates, the amounts earned by AUSA Life on its investments, or any other
factors.

AUSA LIFE'S MANAGEMENT HAS COMPLETE AND SOLE DISCRETION TO DETERMINE THE
GUARANTEED INTEREST RATES. AUSA LIFE CANNOT PREDICT OR GUARANTEE THE LEVEL OF
FUTURE CURRENT INTEREST RATES, EXCEPT THAT AUSA LIFE GUARANTEES THAT FUTURE
CURRENT INTEREST RATES WILL NOT BE BELOW AN EFFECTIVE ANNUAL INTEREST RATE OF
3%.

TRANSFERS

Prior to the Annuity Commencement Date, an Owner can transfer Annuity
Purchase Value from one Investment Option to another within certain limits.

Subject to the limitations and restrictions described below, transfers from
an Investment Option may be made up to thirty days prior to the Annuity
Commencement Date by sending Written Notice signed by the Policy Owner to the
Service Office. The minimum amount which may be transferred is the lesser of
$500 or the entire Subaccount or Guaranteed Period Option Annuity Purchase
Value. If the Subaccount or Guaranteed Period Option Annuity Purchase Value
remaining after a transfer is less than $500, AUSA Life reserves the right to
include that amount as part of the transfer. Authorization of transfers by
telephone or other electronic means of communication is not permitted.

The Owner may transfer an amount up to the interest credited in the One Year
Guaranteed Period Option to any Subaccount(s) of the Mutual Fund Account prior
to the end of the Guaranteed Period. Such Interest Transfers may affect the
interest crediting rates on the remaining funds in the Guaranteed Period
Option. This is because Interest Transfers may have the effect of reducing or
eliminating principal amounts in the Guaranteed Period Option, since, for
purposes of crediting interest, AUSA Life considers the oldest Premium Payment
or transfer into the Guaranteed Period Option, plus interest allocable to that
particular Premium Payment or transfer to be withdrawn first.

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The maximum Annuity Purchase Value that can be transferred from the One Year
Guaranteed Period Option prior to the end of the Guaranteed Period is 25% of
that Option's Annuity Purchase Value, less amounts previously transferred out
of that Option during the current Policy Year. The entire Annuity Purchase
Value may be transferred from the One Year Guaranteed Period Option at the end
of the Guaranteed Period.

Transfers prior to the Annuity Commencement Date currently may be made
without charge as often as the Owner wishes, subject to the minimum dollar
amount specified above. AUSA Life reserves the right to limit these transfers
prior to the Annuity Commencement Date to no more than 12 per Policy Year in
the future or to charge up to $10 per transfer in excess of 12 per Policy
Year; however, currently there is no charge for any transfers. If a transfer
charge is assessed in the future, the amount of the charge will be deducted
from the balance in the remaining subaccount, if sufficient, otherwise, from
the subaccount to which the transfer is made.

Transfers out of the Dollar Cost Averaging Fixed Account, except through an
automatic Dollar Cost Averaging program, are not allowed.

After the Annuity Commencement Date, transfers between the Fixed Account and
Mutual Fund Account are not permitted.

REINSTATEMENTS

Requests are occasionally received by AUSA Life to reinstate funds which had
been transferred to another company by a Section 1035 exchange or trustee-to-
trustee transfer under the Code. In this situation AUSA Life will require the
Owner to replace the same total amount of money in the applicable Subaccounts
and/or Fixed Accounts as taken from them to effect the exchange. The total
amount of money reapplied to the Separate Account will be used to purchase a
number of Accumulation Units available for each Subaccount based on the
Accumulation Unit prices at the date of reinstatement (within two days of the
date the funds are received by AUSA Life). The number of Accumulation Units
available on the reinstatement date may be more or less than the number
surrendered for the exchange. Amounts reapplied to the Fixed Account will
receive the effective annual interest rate they would otherwise have received,
had they not been withdrawn. However, an adjustment will be made to the amount
reapplied to compensate AUSA Life for the additional interest credited during
the period of time between the withdrawal and the reapplication of the funds.
Owners should consult a qualified tax adviser concerning the tax consequences
of any Section 1035 exchanges or reinstatements.

DOLLAR COST AVERAGING (DCA)

Under the Dollar Cost Averaging program prior to the Annuity Commencement
Date, the Policy Owner can instruct AUSA Life to automatically transfer an
amount specified by the Policy Owner (subject to minimum requirements) from
the DCA Fixed Account Option, the Endeavor Money Market Subaccount or the
Dreyfus U.S. Government Securities Subaccount to any other Subaccount or
Subaccounts of the Mutual Fund Account. The automatic transfers can be
scheduled to occur monthly or quarterly. DCA transfers will occur on the 28th
day of each month, or each third month, as the case may be. If the DCA request
is received prior to the 28th day of any month, the first transfer will occur
on the 28th day of that month. If the DCA request is received on or after the
28th day of any month, the first transfer will occur on the 28th day of the
following month. The Owner may start a Dollar Cost Averaging program at any
time. The amount transferred each time must be at least $500. A minimum of six
(but not more than 24) monthly or four (but not more than eight) quarterly
transfers is required each time the Dollar Cost Averaging program is started
or restarted.

Dollar Cost Averaging results in the purchase of more Accumulation Units
when the unit value is low, and fewer Accumulation Units when the unit value
is high. However, there is

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no guarantee that the Dollar Cost Averaging program will result in higher
Annuity Purchase Values or will otherwise be successful. Dollar Cost Averaging
requires regular investment regardless of fluctuating prices, and does not
guarantee profits nor prevent losses in a declining market. Before electing
this option, individuals should consider their financial ability to continue
transfers through periods of both high and low price levels.

The Policy Owner may request Dollar Cost Averaging when purchasing the
Policy or later. The program will terminate when the amount in the Endeavor
Money Market Subaccount, the DCA Fixed Account, or the Dreyfus U.S. Government
Securities Subaccount is insufficient for the next transfer, at which time the
remaining balance will be transferred.

Except for DCA transfers from the DCA Fixed Account Option, the Owner can
increase or decrease the amount of the transfers by sending AUSA Life a new
Dollar Cost Averaging form. The Owner can discontinue the program by sending a
Written Notice to the Service Office. The minimum number of transfers (six
monthly or four quarterly) requirement must be satisfied each time the DCA
program is restarted. Discontinuance of a DCA program may result in AUSA Life
reducing interest rates credited to amounts remaining in the DCA Fixed Account
if the conditions established for a particular DCA program are not met. There
is no charge for participation in this program.

ASSET REBALANCING

Prior to the Annuity Commencement Date the Policy Owner may instruct AUSA
Life to automatically transfer amounts among the Subaccounts of the Mutual
Fund Account on a regular basis to maintain a desired allocation of the
Annuity Purchase Value among the various Subaccounts selected. Rebalancing
will occur on a monthly, quarterly, semi-annual, or annual basis, beginning on
a date selected by the Policy Owner. If no date is selected, the account will
be rebalanced on the day of the month the Policy was effective. The Policy
Owner must select the percentage of the Annuity Purchase Value desired in each
of the various Subaccounts offered (totaling 100%). Any amounts in the Fixed
Account are ignored for purposes of asset rebalancing. There is no charge for
participation in this program. Rebalancing may be started, stopped, or changed
at any time, except that rebalancing will not be available when:

(1) Dollar Cost Averaging is in effect; or

(2) any other transfer is requested.

There is no charge for participation in this program.

THE POLICY

The Endeavor Variable Annuity Policy is a Flexible Premium Variable Annuity
Policy. The rights and benefits under the Policy are summarized below;
however, the description of the Policy contained in this Prospectus is
qualified in its entirety by reference to the Policy itself, a copy of which
is available upon request from AUSA Life. The Policy may be purchased on a
non-tax qualified basis ("Nonqualified Policy"). The Policy may also be
purchased and used in connection with retirement plans or individual
retirement accounts that qualify for favorable federal income tax treatment
("Qualified Policy").

POLICY APPLICATION AND ISSUANCE OF POLICIES--PREMIUM PAYMENTS

Before it will issue a Policy, AUSA Life must receive a completed Policy
application or transmittal form containing the information AUSA Life needs and
a minimum initial Premium Payment. The minimum initial Premium Payment is
$5,000 for a Nonqualified Policy, $50 for a Policy purchased for use in
connection with a Tax Deferred 403(b) Annuity, or $1,000 for

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any other Qualified Policy. A Policy ordinarily will be issued only in respect
of Annuitants from younger than age 80. The initial Premium Payment is the
only Premium Payment required to be paid under a Policy. Acceptance or
declination of an application shall be based on AUSA Life's underwriting
standards, and AUSA Life reserves the right to reject any application or
Premium Payment based on those underwriting standards.

If the application or transmittal form can be accepted in the form received,
the initial Premium Payment will be credited to the Annuity Purchase Value
within two Business Days after the later of receipt of the information needed
to issue the Policy or receipt of the initial Premium Payment. If the initial
Premium Payment cannot be credited because the application or other issuing
requirements are incomplete, the applicant will be contacted within five
Business Days and given an explanation for the delay and the initial Premium
Payment will be returned at that time unless the applicant consents to AUSA
Life's retaining the initial Premium Payment and crediting it as soon as the
necessary requirements are fulfilled.

The date on which the initial Premium Payment is credited to the Annuity
Purchase Value is the Policy Date. The Policy Date is the date used to
determine Policy Years and Policy Anniversaries.

All checks or drafts for Premium Payments should be made payable to AUSA
Life Insurance Company, Inc. and sent to the Administrative Office. The Death
Benefit will not take effect until the check or draft for the Premium Payment
is honored.

Additional Premium Payments. While the Annuitant is living and prior to the
Annuity Commencement Date, the Owner may make Additional Premium Payments at
any time, and in any frequency. The minimum Additional Premium Payment under
both a Nonqualified Policy and a Qualified Policy is $50, including payments
through automatic deduction. Additional Premium Payments will be credited to
the Policy and added to the Annuity Purchase Value as of the Business Day when
they are received.

Maximum Total Premium Payments. The maximum total Premium Payments allowed
without prior approval of AUSA Life is $1,000,000.

Allocation of Premium Payments. An Owner must allocate Premium Payments to
one or more of the Investment Options. The Owner must specify the initial
allocation in the Policy application or transmittal form. This allocation will
be used for Additional Premium Payments unless the Owner requests a change of
allocation. All allocations must be made in whole percentages and must total
100%. If Premium Payments are allocated to the Dollar Cost Averaging Fixed
Account, complete directions regarding the Subaccount(s) to which transfers
are to be made must be specified on the application or other proper Written
Request. If the Owner fails to specify how Premium Payments are to be
allocated, the Premium Payment(s) cannot be accepted.

The Owner may change the allocation instructions for future Additional
Premium Payments by sending Written Notice, signed by the Owner, to AUSA
Life's Service Office. The allocation change will apply to Premium Payments
received after the date the Written Notice is received.

Payment Not Honored by Bank. Any payment due under the Policy which is
derived, all or in part, from any amount paid to AUSA Life by check or draft
may be postponed until such time as AUSA Life determines that such instrument
has been honored.

ANNUITY PURCHASE VALUE

On the Policy Date, the Annuity Purchase Value equals the initial Premium
Payment. Thereafter, the Annuity Purchase Value equals the sum of the values
in the Mutual Fund

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Account and the Fixed Account. The Annuity Purchase Value will increase by (1)
any Additional Premium Payments received by AUSA Life; (2) any increases in
the Annuity Purchase Value due to investment results of the selected
Subaccount(s); and (3) interest credited in the Fixed Account. The Annuity
Purchase Value will decrease by (1) any surrenders, including applicable
Surrender Charges; (2) any decreases in the Annuity Purchase Value due to
investment results of the selected Subaccounts; and (3) the charges and
deductions imposed by AUSA Life.

The Annuity Purchase Value is expected to change from Valuation Period to
Valuation Period, reflecting the investment experience of the selected
Account(s) and/or Subaccount(s), as well as the deductions for charges. A
Valuation Period is the period between successive Business Days. It begins at
the close of business on each Business Day and ends at the close of business
on the next succeeding Business Day. A Business Day is each day that the New
York Stock Exchange is open for trading. Holidays are generally not Business
Days.

The Mutual Fund Account Value. When a Premium Payment is allocated or an
amount is transferred to a Subaccount of the Mutual Fund Account, it is
credited to the Annuity Purchase Value in the form of Accumulation Units. Each
Subaccount of the Mutual Fund Account has a distinct Accumulation Unit value
(the "Unit Value"). The number of Accumulation Units credited is determined by
dividing the Premium Payment or amount transferred by the Unit Value of the
Subaccount as of the end of the Valuation Period during which the allocation
is made. When amounts are transferred out of, or surrendered or withdrawn from
an Account or Subaccount, Accumulation Units are canceled or redeemed in a
similar manner.

For each Subaccount, the Unit Value for a given Business Day is based on the
net asset value of a share of the corresponding Portfolio of the Underlying
Funds. Therefore, the Unit Values will fluctuate from day to day based on the
investment experience of the corresponding Portfolio. The determination of
Subaccount Unit Values is described in detail in the Statement of Additional
Information.

AMENDMENTS

No change in the Policy is valid unless made in writing by AUSA Life and
approved by one of AUSA Life's officers. No registered representative has
authority to change or waive any provision of the Policy.

AUSA Life reserves the right to amend the Policies to meet the requirements
of the Code, regulations or published rulings. An Owner can refuse such a
change by Written Notice to AUSA Life, but a refusal may result in adverse tax
consequences to the Owner.

NON-PARTICIPATING POLICY

The Policy does not participate or share in the profits or surplus earnings
of AUSA Life. No dividends are payable on the Policy.

DISTRIBUTIONS UNDER THE POLICY

SURRENDERS

Prior to the Annuity Commencement Date, the Owner may surrender all or a
portion of the Cash Value in exchange for a cash withdrawal payment from AUSA
Life. The Cash Value is the Annuity Purchase Value less any applicable
Surrender Charge. (See "DISTRIBUTIONS UNDER THE POLICY--Annuity Payment
Options," p. 37.) The Policy will become irrevocable after the Annuity
Commencement Date. (See "DISTRIBUTIONS UNDER THE POLICY--Annuity Payments," p.
36.)

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When requesting a partial withdrawal ($500 minimum), the Owner must instruct
AUSA Life how the withdrawal is to be allocated among various Investment
Options. If the Owner's request for a partial withdrawal from the Investment
Option is greater than the Cash Value of that Investment Option, AUSA Life
will pay the Owner the amount of the Cash Value of that Investment Option. If
no allocation instructions are given, the withdrawal will be deducted from
each Investment Option in the same proportion that the Owner's interest in
each Investment Option bears to the Policy's total Annuity Purchase Value.

Surrenders from the Fixed Account may be delayed for up to six months.
Interest will be paid on any amount deferred for ten days or more. Interest
will be computed daily at the interest rate currently paid on proceeds left
under the Interest Payment Annuity Option.

Beginning in the second Policy Year, an Owner may surrender up to 10% of the
Annuity Purchase Value at the time of withdrawal without a Surrender Charge if
no withdrawal has been made in the current Policy Year ("10% Withdrawals").
Premium amounts withdrawn from the Policy in excess of the 10% Withdrawal
amount or withdrawn in the same Policy Year as a previous withdrawal (and all
surrenders in the first Policy Year) are subject to the Surrender Charge. In
addition, a Surrender Charge will not be assessed if the policy withdrawal is
necessary to meet the minimum distribution requirements for that policy
specified by the IRS for tax qualified plans.

10% Withdrawals will reduce the Policy Value by the amount withdrawn.
Amounts requested in excess of the 10% Withdrawal are referred to as Excess
Partial Withdrawals. Excess Partial Withdrawals will reduce the Annuity
Purchase Value by an amount equal to (X + Z) where:

X = Excess Partial Withdrawal

Z = Surrender Charge on X.

For a discussion of the Surrender Charge, see "CHARGES AND DEDUCTIONS--
Surrender Charge," p. 43.

Since the Owner assumes the investment risk with respect to Premium Payments
allocated to the Mutual Fund Account, and because withdrawals are subject to a
Surrender Charge, and possibly premium taxes, the total amount paid upon total
surrender of the Cash Value (taking any prior surrenders into account) may be
more or less than the total Premium Payments made. Following a surrender of
the total Cash Value, or at any time the Annuity Purchase Value is zero, all
rights of the Owner and Annuitant will terminate.

In addition to the Surrender Charge and any applicable premium taxes,
surrenders may be subject to income taxes and, if the Owner is younger than
age 59 1/2, a 10% Federal penalty tax. (See "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES," p. 45.)

SYSTEMATIC PAYOUT OPTION

Under the Systematic Payout Option Policy Owners can instruct AUSA Life to
make automatic payments to them monthly, quarterly, semi-annually or annually
from a specified Subaccount. Monthly and quarterly payments can only be sent
by electronic funds transfer directly to a checking or savings account. The
minimum payment is $50. The maximum payment is 10% of the Annuity Purchase
Value at the time the Systematic Payout is elected divided by the number of
payments made per year (for example, 12 for monthly). If this amount is below
the minimum distribution requirements for that policy specified by the IRS for
tax qualified plans, the maximum payment will be increased to this minimum
required distribution amount. The "Request for Systematic Withdrawal" form
must specify a date for the first payment, which must be at least 30 days but
not more than one year after the form is submitted (that is, Systematic
Payouts will start at the end of the payment mode selected,

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<PAGE>

but not earlier than 30 days from the date of request). There is no additional
fee imposed for participation in a Systematic Payout Option program.

The Surrender Charge will be waived for Policy Owners of Qualified Policies
who are under age 59 1/2 if they take Systematic Payouts using one of the
payout methods described in I.R.S. Notice 89-25, Q & A-12 (the Life Expectancy
Recalculation Option, Amortization, or Annuity Factor) which generally require
payments for life or life expectancy. These payments must be continued until
the later of age 59 1/2 or five years from their commencement. No additional
withdrawals may be taken during this time. For Qualified Policies held by
Policy Owners age 59 1/2 or older, the Surrender Charge will be waived if
payments are made using the Life Expectancy Recalculation Option.

In addition, for either Qualified or Non-qualified Policies the Surrender
Charge will not be imposed on Systematic Payouts.

In certain circumstances amounts withdrawn pursuant to a Systematic Payout
may be included in your income and may be subject to penalty taxes. In
addition, Qualified Policies are subject to complex rules with respect to
restrictions on and taxation of distributions, including the applicability of
penalty taxes. Therefore, the Owner should consult a qualified tax adviser
before requesting a Systematic Payout. (See "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES," p. 45)

ANNUITY PAYMENTS

Annuity Commencement Date. Annuity Payments under a Policy will begin on the
Annuity Commencement Date which is selected by the Policy Owner at the time
the Policy is applied for. The Annuity Commencement Date may be changed from
time to time by the Policy Owner by Written Notice to AUSA Life, provided that
notice of each change is received by AUSA Life at its Service Office at least
30 days prior to the then current Annuity Commencement Date. Except as
otherwise permitted by AUSA Life, a new Annuity Commencement Date must be a
date which is: (1) at least 30 days after the date notice of the change is
received by AUSA Life; and (2) not later than the last day of the policy month
following the Annuitant's 90th birthday. The Annuity Commencement Date may
also be changed by the Beneficiary's election of the Annuity Option after the
Annuitant's death.

Election of Payment Option. During the lifetime of the Annuitant and prior
to the Annuity Commencement Date, the Policy Owner may choose an Annuity
Payment Option or change the election, but Written Notice of any election or
change of election must be received by AUSA Life at its Service Office at
least 30 days prior to the Annuity Commencement Date. If no election is made
prior to the Annuity Commencement Date, Annuity Payments will be made (i)
under Payment Option 3, life income with level payments for 10 years certain,
using the existing Annuity Purchase Value of the Fixed Account, or (ii) under
Payment Option 3-V, life income with variable payments for 10 years certain,
using the existing Annuity Purchase Value of the Mutual Fund Account, or (iii)
in a combination of (i) and (ii). If the Annuity Purchase Value on the Annuity
Commencement Date is less than $2,000, AUSA Life reserves the right to pay it
in one lump sum in lieu of applying it under an Annuity Payment Option.

Prior to the Annuity Commencement Date, the Beneficiary may elect to receive
the Death Benefit in a lump sum or under one of the Payment Options, to the
extent allowed by law and subject to the terms of any settlement agreement.
(See "DISTRIBUTIONS UNDER THE POLICY--Death Benefit," p. 40.) Annuity Payments
will be made on either a fixed basis or a variable basis as selected by the
Policy Owner (or the Beneficiary, after the Annuitant's death).

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<PAGE>

The person who elects a Payment Option can also name one or more successor
payees to receive any unpaid amount AUSA Life has at the death of a payee.
Naming these payees cancels any prior choice of a successor payee.

A payee who did not elect the Payment Option does not have the right to
advance or assign payments, take the payments in one sum, or make any other
change. However, the payee may be given the right to do one or more of these
things if the person who elects the option so instructs AUSA Life in writing
and AUSA Life agrees.

Unless the Policy Owner specifies otherwise, the payee shall be the
Annuitant, or, after the Annuitant's death, the Beneficiary. AUSA Life may
require written proof of the age of any person who has an annuity purchased
under Payment Option 3, 3-V, 5 or 5-V.

Premium Tax. AUSA Life may be required by state law to pay premium tax on
the amount applied to a Payment Option or upon withdrawal. If so, AUSA Life
will deduct the premium tax before applying or paying the proceeds.

Supplementary Policy. Once proceeds become payable and a choice has been
made, AUSA Life will issue a Supplementary Policy in settlement of the option
elected under the Policy setting forth the terms of the option elected. The
Supplementary Policy will name the payees and will describe the payment
schedule.

ANNUITY PAYMENT OPTIONS

The Policy provides five Payment Options which are described below. Three of
these are offered as either "Fixed Payment Options" or "Variable Payment
Options," and two are only available as Fixed Payment Options. The Policy
Owner may elect a Fixed Payment Option, a Variable Payment Option, or a
combination of both. If the Policy Owner elects a combination, he must specify
what part of the Policy Proceeds are to be applied to the Fixed and Variable
Options (and he must also specify which Subaccounts for the Variable Options).

NOTE CAREFULLY: Under Payment Options 3(1) and 5 (including 3-V(1) and 5-V),
it would be possible for only one Annuity Payment to be made if the
Annuitant(s) were to die before the due date of the second Annuity Payment;
only two Annuity Payments if the Annuitant(s) were to die before the due date
of the third Annuity Payment; and so forth.

On the Annuity Commencement Date, the Policy's Annuity Purchase Value will
be applied to provide for Annuity Payments under the selected Annuity Option
as specified. The Annuity Purchase Value is the Annuity Purchase Value for the
Valuation Period which ends immediately preceding the Annuity Commencement
Date, reduced by any applicable premium or similar taxes.

The effect of choosing a Fixed Annuity Option is that the amount of each
payment will be set on the Annuity Commencement Date and will not change. If a
Fixed Annuity Option is selected, the Annuity Purchase Value will be
transferred to the general account of AUSA Life, and the Annuity Payments will
be fixed in amount by the fixed annuity provisions selected and the age and
sex (if consideration of sex is allowed) of the Annuitant. For further
information, contact AUSA Life at its Service Office.

Guaranteed Values. There are five Fixed Annuity Options. Payment Options 1,
2 and 4 are based on a guaranteed interest rate of 3%. Payment Options 3 and 5
are based on a guaranteed interest rate of 3% using the "1983 Table a" (male,
female, and unisex if required by law) mortality table improved to the year
2000 with projection scale G. ("The 1983 Table a" mortality rates are adjusted
based on improvements in mortality since 1983 to more appropriately reflect
increased longevity. This is accomplished using a set of improvement factors
referred to as projection scale G and results in lower payments.)

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Payment Option 1--Interest Payments. The policy proceeds may be left with
AUSA Life for any term as agreed by AUSA Life and the Owner. AUSA Life will
pay the interest in equal payments or it may be left to accumulate. Withdrawal
rights will be agreed upon by the Owner and AUSA Life when the option is
elected.

Payment Option 2--Income for a Specified Period. Level payments of the
proceeds with interest are made for the fixed period elected, at which time
the funds are exhausted.

Payment Option 3--Life Income. An election may be made between:

1. "No Period Certain"--Level payments will be made during the lifetime of
the Annuitant.

2. "10 Years Certain"--Level Payments will be made for the longer of the
Annuitant's lifetime or ten years.

3. "Guaranteed Return of Policy Proceeds"--Level payments will be made for
the longer of the Annuitant's lifetime or the number of payments which, when
added together, equals the proceeds applied to the income option.

Payment Option 4--Income of a Specified Amount. Payments are made for any
specified amount until the proceeds with interest are exhausted.

Payment Option 5--Joint and Survivor Annuity. Payments are made during the
joint lifetime of the payee and a joint payee of the Owner's selection.
Payments will be made as long as either person is living.

Other Payment Options may be arranged by agreement with AUSA Life. Certain
options may not be available in some states.

Current immediate annuity rates for the same class of annuities will be used
if higher than the guaranteed rate (guaranteed rates are based upon the tables
contained in the Policy). Current rates may be obtained from AUSA Life.
Current Annuity Payments will not be less than those which would be offered to
new single consideration immediate annuity (as described in Section
4223(a)(1)(E) of the New York Insurance Laws) applicants of the same class.

Variable Payment Options. The dollar amount of the first Variable Annuity
Payment will be determined in accordance with the annuity payment rates set
forth in the applicable table contained in the Policy. The tables are based on
a 5% effective annual Assumed Investment Return and the "1983 Table a" (male,
female, and unisex if required by law) mortality table improved to the year
2000 with projection Scale G. ("The 1983 Table a" mortality rates are adjusted
based on improvements in mortality since 1983 to more appropriately reflect
increased longevity. This is accomplished using a set of improvement factors
referred to as projection scale G.) The dollar amount of additional Variable
Annuity Payments will vary based on the investment performance of the
Subaccount of the Mutual Fund Account selected by the Annuitant or
Beneficiary. If the actual investment performance exactly matched the Assumed
Investment Return of 5% at all times, the amount of each Variable Annuity
Payment would remain equal. If actual investment performance exceeds the
Assumed Investment Return, the amount of the payments would increase.
Conversely, if actual investment performance is worse than the Assumed
Investment Return, the amount of the payments would decrease. The smallest
annual rate of investment return which would have to be earned on Mutual Fund
Account assets so that the dollar amount of Variable Annuity Payments will not
decrease is 6.4% (equal to 5% Assumed Investment Return and a 1.40% maximum
Mortality and Expense Risk Fee and Administrative Charge). The Mortality and
Expense Risk Fee and Administrative Charge may increase on the Annuity
Commencement Date, however the combined annual rate for such fee and charge
will not be greater than 1.40%

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<PAGE>

Determination of the First Variable Payment. The amount of the first
variable payment depends upon the sex (if consideration of sex is allowed) and
adjusted age of the Annuitant. The adjusted age is the Annuitant's actual age
nearest birthday, at the Annuity Commencement Date, adjusted as follows:

<TABLE>
<CAPTION>
ANNUITY COMMENCEMENT DATE ADJUSTED AGE
------------------------- ------------------
<S> <C>
Before 2001............................................. Actual Age
2001-2010............................................... Actual Age minus 1
2011-2020............................................... Actual Age minus 2
2021-2030............................................... Actual Age minus 3
2031-2040............................................... Actual Age minus 4
After 2040.............................................. Actual Age minus 5
Before 2001............................................. Actual Age
</TABLE>

This adjustment assumes an increase in life expectancy, and therefore it
results in lower payments than without such an adjustment.

The following Variable Payment Options generally are available:

Payment Option 3-V--Life Income. An election may be made between:

1. "No Period Certain"--Payments will be made during the lifetime of the
Annuitant.

2. "10 Years Certain"--Payments will be made for the longer of the
Annuitant's lifetime or ten years.

Payment Option 5-V--Joint and Survivor Annuity. Payments are made as long as
either the payee or the joint payee is living.

Certain Payment Options may not be available in some states.

Determination of Additional Variable Payments. All Variable Annuity Payments
other than the first are calculated using "Annuity Units" which are credited
to the Policy. The number of Annuity Units to be credited in respect of a
particular Subaccount is determined by dividing that portion of the first
Variable Annuity Payment attributable to that Subaccount by the Annuity Unit
Value of that Subaccount for the Annuity Commencement Date. The number of
Annuity Units of each particular Subaccount credited to the Policy then
remains fixed. The dollar value of variable Annuity Units in the chosen
Subaccount will increase or decrease reflecting the investment experience of
the chosen Subaccount. The dollar amount of each Variable Annuity Payment
after the first may increase, decrease or remain constant, and is equal to the
sum of the amounts determined by multiplying the number of Annuity Units of
each particular Subaccount credited to the Policy by the Annuity Unit Value
for the particular Subaccount on the date the payment is made.

Transfers. Prior to the Annuity Commencement Date, a Policy Owner may
transfer the value of the Annuity Units from one Subaccount to another within
the Mutual Fund Account or to the Fixed Account. However, after the Annuity
Commencement Date no transfers may be made from the Fixed Account to the
Mutual Fund Account or from the Mutual Fund Account to the Fixed Account. The
minimum amount which may be transferred is the lesser of $10 of monthly income
or the entire monthly income of the variable Annuity Units in the Subaccount
from which the transfer is being made. The remaining Annuity Units in the
Subaccount must provide at least $10 of monthly income. If, after a transfer,
the monthly income of the remaining Annuity Units in a Subaccount would be
less than $10, AUSA Life reserves the right to include those Annuity Units as
part of the transfer. AUSA Life reserves the right to limit transfers between
Subaccounts after the Annuity Commencement Date to once per Policy Year.

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<PAGE>

Tax Withholding. A portion or the entire amount of the Annuity Payments may
be taxable as ordinary income. If, at the time the Annuity Payments begin, the
Owner has not provided AUSA Life with a written election not to have federal
income taxes withheld, AUSA Life must by law withhold such taxes from the
taxable portion of such annuity payments and remit that amount to the federal
government. Withholding is mandatory as to certain Qualified Policies. (See
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES" p. 45.)

Adjustment of Annuity Payments. Payments will be made at 1, 3, 6, or 12
month intervals. If the individual payments provided for would be or become
less than $50, AUSA Life may change, at its discretion, the frequency of
payments to such intervals as will result in payments of at least $50. If the
Annuity Purchase Value on the Annuity Commencement Date is less than $2,000,
AUSA Life may pay such value in one sum in lieu of the payments otherwise
provided for.

DEATH BENEFIT

Death of Annuitant Prior to Annuity Commencement Date. If the Annuitant is
also an Owner and dies before the Annuity Commencement Date, the Death Benefit
is calculated and is payable to the Beneficiary when AUSA Life receives due
proof of death, and election of the method of settlement, and return of the
Policy. The amount of the Death Benefit will be the greatest of (a) the
Annuity Purchase Value, (b) the Cash Value, or (c) the Guaranteed Minimum
Death Benefit (GMDB), plus any additional Premium Payments received, less any
withdrawals from the date of death to the date of the payment. The Death
Benefit is not payable upon the death of the Annuitant if the Annuitant and
the Owner are not the same person, unless the Owner makes a separate election
to do so.

There are two Guaranteed Minimum Death Benefit Options available, the
"Return of Premium Death Benefit" and the "Annual Step-Up Death Benefit." The
Return of Premium Guaranteed Minimum Death Benefit is equal to the total
Premium Payments made, less any Adjusted Partial Withdrawals as of the date of
death. The Annual Step-Up Guaranteed Minimum Death Benefit is equal to the
largest Annuity Purchase Value on the Date of Issue or on any Policy
Anniversary prior to the earlier of the date of death or the Owner's 81st
birthday, plus Premium Payments less any Adjusted Partial Withdrawals taken,
subsequent to the date of the Policy Anniversary with the largest Annuity
Purchase Value.

If the surviving spouse is the Beneficiary and elects to continue the policy
in lieu of receiving the Death Benefit, an amount equal to the excess, if any,
of the Guaranteed Minimum Death Benefit (i.e., the Return of Premium Death
Benefit or the Annual Step-Up Death Benefit) over the Annuity Purchase Value,
will then be added to the Annuity Purchase Value. This amount will be added
only once, at the time of such election.

Adjusted Partial Withdrawal. To determine the Guaranteed Minimum Death
Benefit for each partial withdrawal, the Adjusted Partial Withdrawal is the
sum of (1) and (2), where

(1) The Surrender charge-free withdrawal amount taken and,

(2) the product of (a) times (b) where:

(a) is the ratio of the amount of the Excess Partial Withdrawal to
the Annuity Purchase Value on the date of (but prior to) the Excess
Partial Withdrawal; and

(b) is the Death Benefit on the date of (but prior to) the Excess
Partial Withdrawal.

If a partial withdrawal is taken when the Guaranteed Minimum Death Benefit
exceeds the Annuity Purchase Value, the Guaranteed Minimum Death Benefit will
be reduced in an amount more than the amount of the partial withdrawal. In
that case, the total proceeds of a partial withdrawal followed by a Death
Benefit could be less than total Premium Payments.

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<PAGE>

Note that the Death Benefit is payable on the death of the Annuitant who is
an Owner, not the death of the Owner, if different (if the Annuitant who is
not an Owner dies, the Owner will become the Annuitant, unless the Owner
specifically requests on the policy application or in writing that the Death
Benefit be paid to the beneficiary upon the Annuitant's death and AUSA Life
agrees to such election).

Due Proof of Death of the Annuitant is proof that the Annuitant who is the
Owner died prior to the commencement of Annuity Payments. Upon receipt of this
proof and an election of a method of settlement and return of the Policy, the
Death Benefit generally will be paid within seven days, or as soon thereafter
as AUSA Life has sufficient information about the Beneficiary to make the
payment. The Beneficiary may receive the amount payable in a lump sum cash
benefit, or, subject to any limitation under any state or federal law, rule,
or regulation, under one of the Annuity Payment Options described above,
unless a settlement agreement is effective at the death of the Annuitant
preventing such election.

If the Annuitant was an Owner, and the Beneficiary was not the Annuitant's
spouse, then (1) the Death Benefit must be distributed within five years of
the date of the deceased Annuitant's death, or (2) payments under a Payment
Option must begin within one year of the deceased Annuitant's death and must
be made for the Beneficiary's lifetime or for a period certain (so long as any
certain period does not exceed the Beneficiary's life expectancy). Death
proceeds which are not paid to or for the benefit of a natural person must be
distributed within five years of the date of the deceased Annuitant's death.
If the sole Beneficiary is the deceased Annuitant's surviving spouse, such
spouse may elect to continue the Policy as the new Annuitant and Policy Owner
instead of receiving the Death Benefit. (See "Federal Tax Matters" in the
Statement of Additional Information).

If the Annuitant is not the Owner, and the Owner dies prior to the Annuity
Commencement Date, a Successor Owner may surrender the Policy at any time for
the Cash Value. If the Successor Owner is not the deceased Owner's surviving
spouse, however, this amount must be distributed within five years after the
date of death of the Owner, or payments under a Payment Option must begin
within one year of the deceased Owner's death and must be made for the
Beneficiary's lifetime or for a period certain (so long as any certain period
does not exceed the Beneficiary's life expectancy).

Death On or After Annuity Commencement Date. The death benefit payable on or
after the Annuity Commencement Date depends on the Payment Option selected. If
any Owner dies on or after the Annuity Commencement Date, but before the
entire interest in the Policy is distributed, the remaining portion of such
interest in the Policy will be distributed at least as rapidly as under the
method of distribution being used as of the date of that Owner's death.

Beneficiary. The Beneficiary designation in the application will remain in
effect until changed. The Owner may change the designated Beneficiary by
sending Written Notice to AUSA Life. The Beneficiary's consent to such change
is not required unless the Beneficiary was irrevocably designated or consent
is required by law. (If an irrevocable Beneficiary dies, the Owner may then
designate a new Beneficiary.) The change will take effect as of the date the
Owner signs the Written Notice, whether or not the Owner is living when the
Notice is received by AUSA Life. AUSA Life will not be liable for any payment
made before the Written Notice is received. If more than one Beneficiary is
designated, and the Owner fails to specify their interests, they will share
equally.

DEATH OF OWNER

Federal tax law requires that if any Owner (including any joint Owner or any
Successor Owner who has become a current Owner) dies before the Annuity
Commencement Date, then the Cash Value of the Policy must generally be
distributed within five years of the date

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<PAGE>

of death of such Owner or the Contingent Owner. Certain rules apply where 1)
the spouse of the deceased Owner is the sole Beneficiary, 2) the Owner is not
a natural person and the primary Annuitant dies or is changed, or 3) any Owner
dies after the Annuity Commencement Date. See "Federal Tax Matters" in the
Statement of Additional Information for a detailed description of these rules.
Other rules may apply to Qualified Policies. (See also "DISTRIBUTIONS UNDER
THE POLICY--Death Benefit," p. 40).

RESTRICTIONS UNDER SECTION 403(B) PLANS

Section 403(b) of the Internal Revenue Code provides for tax-deferred
retirement savings plans for employees of certain non-profit and educational
organizations. In accordance with the requirements of Section 403(b), any
Policy used for a 403(b) plan will prohibit distributions of elective
contributions and earnings on elective contributions except upon death of the
employee, attainment of age 59 1/2, separation from service, disability, or
financial hardship. In addition, income attributable to elective contributions
may not be distributed in the case of hardship.

RESTRICTIONS UNDER QUALIFIED POLICIES

Other restrictions with respect to the election, commencement, or
distribution of benefits may apply under Qualified Policies or under the terms
of the plans in respect of which Qualified Policies are issued.

CHARGES AND DEDUCTIONS

No deductions are made from Premium Payments upon purchase of a Policy, so
that the full amount of each Premium Payment is invested in one or more of the
Accounts. AUSA Life will make certain charges and deductions in connection
with the Policy in order to compensate it for incurring expenses in
distributing the Policy, bearing mortality and expense risks under the Policy,
and administering the Accounts and the Policies. Charges may also be made for
premium taxes, federal, state or local taxes, or for certain transfers or
other transactions. Charges and expenses are also deducted from the Underlying
Funds.

SURRENDER CHARGE

AUSA Life will incur expenses relating to the sale of Policies, including
commissions to registered representatives and other promotional expenses. AUSA
Life may deduct a Surrender Charge from amounts surrendered (i.e., withdrawn)
in connection with a full or partial Policy surrender in order to cover
distribution expenses. A Surrender Charge will not be applied to withdrawals,
after the first Policy Year, of up to 10% of the Annuity Purchase Value, if
there have been no withdrawals in the current Policy Year. A Surrender Charge
will also not be applied if the withdrawal is necessary to meet the minimum
distribution requirements for that policy specified by the IRS for tax
qualified plans. The Surrender Charge is also waived upon exercise of certain
Systematic Payment Options. (See "DISTRIBUTIONS UNDER THE POLICY--Systematic
Payout Option," p. 35.)

The amount of the Surrender Charge is determined by multiplying the amount
of the Premium Payment by the applicable Surrender Charge Percentage. The
applicable Surrender Charge Percentage will depend upon the number of Policy
Anniversaries that have elapsed since the Premium Payment that is being
withdrawn was made. For this purpose, surrenders are allocated to Premium
Payments on a "first in-first out" basis, that is, first to the oldest Premium
Payment, then to the next oldest Premium Payment, and so on. Premium Payments
are deemed to be withdrawn before earnings, and after all Premium Payments
have been

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<PAGE>

withdrawn, the remaining Annuity Purchase Value may be withdrawn without any
Surrender Charge. The following is the table of Surrender Charge Percentages:

<TABLE>
<CAPTION>
NUMBER OF YEARS PERCENTAGE APPLICABLE TO EACH
SINCE PREMIUM PAYMENT EXCESS PREMIUM WITHDRAWAL
--------------------- -----------------------------
<S> <C>
0-1............................................ 7%
1-2............................................ 6%
2-3............................................ 5%
3-4............................................ 4%
4-5............................................ 3%
5-6............................................ 2%
6-7............................................ 1%
</TABLE>

AUSA Life anticipates that the Surrender Charge will not generate sufficient
funds to pay the cost of distributing the Policies. If this charge is
insufficient to cover the distribution expenses, the deficiency will be met
from AUSA Life's general funds, which will include amounts derived from the
charge for mortality and expense risks.

MORTALITY AND EXPENSE RISK FEE

AUSA Life imposes a daily fee as compensation for bearing certain mortality
and expense risks in connection with the Policies. This fee depends on the
Death Benefit Option selected and the number of Policy Years that have elapsed
since the Date of Issue. For the Annual Step-Up Death Benefit, the fee is
1.40% in the first seven Policy Years and 1.25% thereafter. For the Return of
Premium Death Benefit, the fee is 1.25% in the first seven years and 1.10%
thereafter. The Mortality and Expense Risk Fee is reflected in the
Accumulation or Annuity Unit Values for the Policy for each Subaccount. The
Mortality and Expense Risk Fee may increase on the Annuity Commencement Date.
In no event will the total of the Mortality and Expense Risk Fee and
Administrative Charge exceed 1.40% on or after the Annuity Commencement Date.

Annuity Purchase Values and Annuity Payments are not affected by changes in
actual mortality experience nor by actual expenses incurred by AUSA Life. The
mortality risks assumed by AUSA Life arise from its contractual obligations to
make Annuity Payments (determined in accordance with the Annuity tables and
other provisions contained in the Policy) and to pay Death Benefits prior to
the Annuity Commencement Date. Thus, Owners are assured that neither an
Annuitant's own longevity nor an unanticipated improvement in general life
expectancy will adversely affect the monthly Annuity payments that the
Annuitant will receive under the Policy.

AUSA Life also bears substantial risk in connection with the Death Benefit
Guarantee since AUSA Life will pay a Death Benefit equal to the Guaranteed
Minimum Death Benefit if that amount is higher than the Annuity Purchase
Value.

The expense risk assumed by AUSA Life is the risk that AUSA Life's actual
expenses in administering the Policy and the Accounts will exceed the amount
recovered through the Administrative and Service Charges.

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<PAGE>

If the Mortality and Expense Risk Fee is insufficient to cover AUSA Life's
actual costs, AUSA Life will bear the loss; conversely, if the charge is more
than sufficient to cover costs, the excess will be profit to AUSA Life. AUSA
Life expects a profit from this charge. To the extent that the Surrender
Charge is insufficient to cover the actual cost of Policy distribution, the
deficiency will be met from AUSA Life's general corporate assets, which may
include amounts, if any, derived from the Mortality and Expense Risk Fee. A
Mortality and Expense Risk Fee is assessed during the accumulation phase and
during the annuity phase for all Variable Annuity Options.

ADMINISTRATIVE CHARGES

In order to cover the costs of administering the Policies and the Accounts,
AUSA Life deducts an annual Service Charge from the Annuity Purchase Value of
each Policy, and also deducts a daily Administrative Charge from the assets of
each Subaccount of the Mutual Fund Account.

The Service Charge is deducted from the Annuity Purchase Value of each
Policy on each Policy Anniversary prior to the Annuity Commencement Date.
After the Annuity Commencement Date, the charge is not deducted. This annual
Service Charge is $35 and it will not be increased during the term of the
Policy. It will also never exceed 2% of the Annuity Purchase Value. This
charge is waived if the sum of the Premium Payments made less the sum of all
Partial Withdrawals is at least $50,000 on the Policy Anniversary. The Service
Charge will be deducted only from the Subaccounts in the Mutual Fund Account,
in the same proportion that the Owner's interest in each Subaccount bears to
the Annuity Purchase Value in the Mutual Fund Account.

AUSA Life deducts a daily Administrative Charge from the net assets of each
Subaccount of the Mutual Fund Account. This charge currently is equal to an
effective annual rate of .15% of the net assets in the Mutual Fund Account.
The Administrative Expense Charge may be increased in the future, but the
combined total of this charge and the Mortality and Expense Risk Fee will not
exceed 1.55% in the first seven Policy Years (1.40% after) for the Annual
Step-Up Death Benefit, and 1.40% (1.25% after the first seven Policy Years)
for the Return of Premium Death Benefit.

PREMIUM TAXES

AUSA Life currently makes no deduction from the Premium Payments for any
state premium taxes AUSA Life pays in connection with Premium Payments it
receives under the Policies. When permitted by state law, AUSA Life will not
deduct the aggregate premium taxes that it pays on behalf of a particular
Policy from the Annuity Purchase Value until the earliest of (i) the Annuity
Commencement Date, (ii) the surrender of a Policy, or (iii) payment of the
death proceeds of a Policy. Premium taxes currently range from 0% to 3.50% of
Premium Payments.

FEDERAL, STATE AND LOCAL TAXES

No charges are currently made for federal, state, or local taxes other than
premium taxes. However, AUSA Life reserves the right to deduct charges in the
future for any taxes or other economic burden resulting from the application
of any tax laws that AUSA Life determines to be attributable to the accounts
or the policies.

TRANSFER CHARGE

There is no charge for the first 12 transfers between Investment Options in
each Policy Year. AUSA Life reserves the right to impose a $10 charge for the
thirteenth and each subsequent transfer request made by the Owner during a
single Policy Year. For the purpose

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<PAGE>

of determining whether a transfer charge is payable, Premium Payment
allocations are not considered transfers. All transfer requests made
simultaneously will be treated as a single request. No transfer charge will be
imposed for any transfer which is not at the Owner's request.

OTHER EXPENSES INCLUDING INVESTMENT ADVISORY FEES

Each of the Portfolios of the Underlying Funds is responsible for all of its
expenses. In addition, charges will be made against each of the Portfolios of
the Underlying Funds for investment advisory services provided to the
Portfolio. The net assets of each Portfolio of the Underlying Funds will
reflect deductions in connection with the investment advisory fee and other
expenses.

For more information concerning the investment advisory fee and other
charges against the Portfolios, see the prospectuses for the Underlying Funds,
current copies of which accompany this Prospectus.

EMPLOYEE AND AGENT PURCHASES

The Policy may be acquired by an employee or registered representative of
any broker/dealer authorized to sell the Policy or their spouse or minor
children, or by an officer, director, trustee or bona-fide full-time employee
of AUSA Life or its affiliated companies or their spouse or minor children. In
such a case, AUSA Life may credit an amount equal to a percentage of each
Premium Payment to the Policy due to lower acquisition costs AUSA Life
experiences on those purchases. The credit will be reported to the Internal
Revenue Service as taxable income to the employee or registered
representative. AUSA Life may offer certain employer sponsored savings plans,
in its discretion reduced fees and charges including, but not limited to, the
Surrender Charges, the Mortality and Expense Risk Fee and the Administrative
Charge for certain sales under circumstances which may result in savings of
certain costs and expenses. In addition, there may be other circumstances of
which AUSA Life is not presently aware which could result in reduced sales or
distribution expenses. Credits to the Policy or reductions in these fees and
charges will not be unfairly discriminatory against any Owner.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following summary does not constitute tax advice. It is a general
discussion of certain of the expected federal income tax consequences of
investment in and distributions with respect to a Policy, based on the
Internal Revenue Code of 1986, as amended (the "Code"), proposed and final
Treasury Regulations thereunder, judicial authority, and current
administrative rulings and practice. This summary discusses only certain
federal income tax consequences to "United States Persons," and does not
discuss state, local, or foreign tax consequences. United States Persons means
citizens or residents of the United States, domestic corporations, domestic
partnerships and trusts or estates that are subject to United States federal
income tax regardless of the source of their income.

At the time the initial Premium Payment is paid, a prospective purchaser
must specify whether he or she is purchasing a Nonqualified Policy or a
Qualified Policy. If the initial Premium Payment is derived from an exchange
or surrender of another annuity policy, AUSA Life may require that the
prospective purchaser provide information with regard to the federal income
tax status of the previous annuity policy. AUSA Life will require that persons
purchase separate Policies if they desire to invest monies qualifying for
different annuity tax treatment under the Code. Each such separate Policy
would require the minimum initial Premium Payment stated above. Additional
Premium Payments under a Policy must qualify for the same federal income tax
treatment as the initial Premium Payment under the Policy;

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<PAGE>

AUSA Life will not accept an Additional Premium Payment under a Policy if the
federal income tax treatment of such Premium Payment would be different from
that of the initial Premium Payment.

The Qualified Policies were designed for use by retirement plans and
individual retirement accounts that qualify for special federal income tax
treatment under Sections 401(a), 403(b), 408(a), 408A or 457 of the Code and
individuals purchasing individual retirement annuities that qualify for
special federal income tax treatment under Section 408(b) of the Code. Certain
requirements must be satisfied in purchasing a Qualified Policy in order for
the plan, account or annuity to retain its special tax treatment. This summary
is not intended to cover such requirements, and assumes that Qualified
Policies are purchased pursuant to retirement plans or individual retirement
accounts, or are individual retirement annuities, that qualify for such
special tax treatment. This summary was prepared by AUSA Life after
consultation with tax counsel, but no opinion of tax counsel has been
obtained.

THE DISCUSSION SET FORTH BELOW IS INCLUDED FOR GENERAL PURPOSES ONLY. EACH
POTENTIAL PURCHASER IS URGED TO CONSULT HIS/HER OWN TAX ADVISER AS TO THE
CONSEQUENCES OF INVESTMENT IN A POLICY UNDER FEDERAL AND APPLICABLE STATE,
LOCAL AND FOREIGN TAX LAWS.

TAX STATUS OF THE POLICY

The following discussion is based on the assumption that the Policy
qualifies as an annuity contract for federal income tax purposes. The
Statement of Additional Information discusses the tax requirements for
qualifying as an annuity contract.

TAXATION OF ANNUITIES

The discussion below applies only to those Policies owned by natural
persons, and that qualify as annuity contracts for federal income tax
purposes. With respect to Owners who are natural persons, the Policy should be
treated as an annuity contract for federal income tax purposes.

In General. Except as described below with respect to Owners who are not
natural persons, an Owner who holds a Policy satisfying the diversification
and distribution requirements described in the Statement of Additional
Information should not be taxed on increases in the Annuity Purchase Value
until an amount is received or deemed received, e.g., upon a partial or full
surrender or as Annuity Payments under the Annuity Option selected. Generally,
any amount received or deemed received under a Nonqualified Annuity Contract
prior to the Annuity Commencement Date is deemed to come first from any
"Income on the Contract" and then from the "Investment in the Contract." The
"Investment in the Contract" generally equals total premium payments less
amounts received which were not includable in gross income. To the extent that
the Annuity Purchase Value (Cash Value in the event of a surrender) exceeds
the "Investment in the Contract," such excess constitutes the "Income on the
Contract." For these purposes such "Income on the Contract" shall be computed
by reference to the aggregation rules described below, and the amount
includable in gross income will be taxable as ordinary income. If at the time
that any amount is received or deemed received there is no "Income on the
Contract" (e.g., because the gross Annuity Purchase Value does not exceed the
"Investment in the Contract" and no aggregation rule applies), then such
amount received or deemed received will not be includable in gross income, and
will simply reduce the "Investment in the Contract."

For this purpose, the assignment, pledge or agreement to assign or pledge
any portion of the Annuity Purchase Value (including assignment of Owner's
right to receive Annuity Payments prior to the Annuity Commencement Date)
generally will be treated as a distribution in the amount of such portion of
the Annuity Purchase Value. Additionally, if an

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<PAGE>

Owner designates a new Owner prior to the Annuity Commencement Date without
receiving full and adequate consideration, the old Owner generally will be
treated as receiving a distribution under the Policy in an amount equal to the
Annuity Purchase Value. A transfer of ownership or an assignment of a Policy,
or designation of an Annuitant or Beneficiary who is not also the Owner, as
well as the selection of certain Annuity Commencement Dates, may result in
certain tax consequences to the Owner that are not discussed herein. An Owner
contemplating any such transfer, designation, selection or assignment of a
Policy should contact a competent tax adviser with respect to the potential
tax effects of such a transaction.

Aggregation Rules. Generally all nonqualified deferred annuity contracts
issued by the same company (or an affiliated company) to the same owner during
any calendar year shall be treated as one annuity contract, and "aggregated"
for purposes of determining the amount includable in gross income. In
addition, for such purposes all individual retirement annuities and accounts
under Section 408 of the Code for an individual are aggregated, and generally
all distributions therefrom during a calendar year are treated as one
distribution made as of the end of such year. The same aggregation rules apply
to Roth individual retirement annuities and accounts. The Roth IRAs and
Traditional IRAs shall be treated separately for distribution purposes.

Surrenders or Withdrawals. In the case of a partial surrender (including
systematic withdrawals) under a Nonqualified Policy, the amount received
generally will be includable in gross income to the extent that it does not
exceed the "Income on the Contract," which is generally equal to the excess of
the Annuity Purchase Value immediately before the partial surrender over the
"Investment in the Contract" at that time. In the case of a partial surrender
(including systematic withdrawals) under a Qualified Policy (other than one
qualified under Section 457 of the Code), a ratable portion of the amount
received is generally excludable from gross income, based on the ratio of the
"Investment in the Contract" to the individual's total account balance or
accrued benefit under the retirement plan at the time of each such payment.
For a Qualified Policy, the "Investment in the Contract" can be zero. Special
tax rules may be available for certain distributions from a Qualified Policy.
In the case of a full surrender under a Nonqualified Policy or a Qualified
Policy, the amount received generally will be taxable only to the extent it
exceeds the "Investment in the Contract," unless the aggregation rules apply.

Annuity Payments. Although the tax consequences may vary depending on the
Annuity Payment Option elected under the Policy, in general only a portion of
the Annuity Payments received after the Annuity Commencement Date will be
includable in the gross income of the recipient.

For Fixed Annuity Payments, in general the excludable portion of each
payment is determined by dividing the "Investment in the Contract" on the
Annuity Commencement Date by the total expected return resulting from the
Annuity Payments for the term of the payments. The remainder of each Annuity
Payment is includable in gross income. Once the "Investment in the Contract"
has been fully recovered, the full amount of any additional Annuity Payments
received is includable in gross income.

For Variable Annuity Payments, the includable portion is generally
determined by an equation that establishes a specific dollar amount of each
payment that is excludable from gross income. This dollar amount is determined
by dividing the "Investment in the Contract" on the Annuity Commencement Date
by the total number of expected periodic payments. The remainder of each
Annuity Payment is includable in gross income. Once the "Investment in the
Contract" has been fully recovered, the full amount of any additional Annuity
Payments is includable in gross income.

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<PAGE>

Where an Owner allocates a portion of the Annuity Purchase Value on the
Annuity Commencement Date to more than one Annuity Payment Option (fixed or
variable), special rules govern the allocation of the Policy's entire
"Investment in the Contract" on such date to each such option, for purposes of
determining the excludable amount of each payment received under that option.
AUSA Life makes no attempt to describe these allocation rules, because they
would prescribe a complex variety of results, depending on how the allocations
were made among the various types of Annuity Payment Options. Instead, any
Owner is advised to consult a competent tax adviser as to the potential tax
effects of allocating any amount of Annuity Purchase Value to any particular
Annuity Payment Option.

If, after the Annuity Commencement Date, Annuity Payments cease by reason of
the death of the Annuitant, the excess (if any) of the "Investment in the
Contract" as of the Annuity Commencement Date over the aggregate amount of
Annuity Payments received on or after the Annuity Commencement Date that was
excluded from gross income is allowable as a deduction for the last taxable
year of the Annuitant.

Taxation of Death Benefit Proceeds. Amounts may be distributed from the
Policy because of the death of an Owner or the Annuitant. Generally, such
amounts are includable in the income of the recipient as follows: (1) if
distributed in a lump sum, they are taxed in the same manner as a full
surrender, as described above, or (2) if distributed under an Annuity Payment
Option, they are taxed in the same manner as Annuity Payments, as described
above. For these purposes, the "Investment in the Contract" is not affected by
the Owner's or Annuitant's death. That is, the "Investment in the Contract"
remains generally the total premium payments less amounts received which were
not includable in gross income.

Penalty Taxes. In the case of any amount received or deemed received from
the Policy, e.g., upon a surrender of a Policy (including systematic
withdrawals) or a deemed distribution under a Policy resulting from a pledge,
assignment or agreement to pledge or assign or an Annuity Payment with respect
to a Policy, there may be imposed on the recipient a federal penalty tax equal
to 10% of the amount includable in gross income. The penalty tax generally
will not apply to any distribution: (i) made on or after the date on which the
taxpayer attains age 59 1/2; (ii) made as a result of the death of the holder
(generally the Owner); (iii) attributable to the disability of the taxpayer;
or (iv) which is part of a series of substantially equal periodic payments
made (not less frequently than annually) for the life (or life expectancy) of
the taxpayer or the joint lives (or joint life expectancies) of such taxpayer
and the taxpayer's beneficiary. Other rules may apply to Qualified Policies.

Withholding. The portion of any distribution under a Policy that is
includable in gross income will be subject to federal income tax withholding
unless the recipient of such distribution elects not to have federal income
tax withheld. Election forms will be provided at the time distributions are
requested or made. For certain Qualified Policies, certain distributions are
subject to mandatory withholding. The withholding rate varies according to the
type of distribution and the Owner's tax status. For qualified policies,
"eligible rollover distributions" from section 401(a) plans and section 403(b)
tax-sheltered annuities are subject to a mandatory federal income tax
withholding of 20%. An eligible rollover distribution is the taxable portion
of any distribution from such a plan, except certain distributions such as
distributions required by the Code or distributions in a specified annuity
form. The 20% withholding does not apply, however, if the Owner chooses a
"direct rollover" from the plan to another tax-qualified plan or IRA.

Qualified Policies. The Qualified Policy is designed for use with several
types of tax-qualified retirement plans. The tax rules applicable to
participants and beneficiaries in tax-qualified retirement plans vary
according to the type of plan and the terms and conditions of the plan.
Special favorable tax treatment may be available for certain types of
contributions and distributions. Adverse tax consequences may result from
contributions in excess of

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specified limits; distributions prior to age 59 1/2 (subject to certain
exceptions); distributions that do not conform to specified commencement and
minimum distribution rules; and in other specified circumstances. Some
retirement plans are subject to distribution and other requirements that are
not incorporated into our Policy administration procedures. Owners,
participants and beneficiaries are responsible for determining that
contributions, distributions and other transactions with respect to the
Policies comply with applicable law.

For qualified plans under Section 401(a), 403(a), 403(b), and 457, the Code
requires that distributions generally must commence no later than the later of
April 1 of the calendar year following the calendar year in which the Owner
(or plan participant) (i) reaches age 70 1/2 or (ii) retires, and must be made
in a specified form or manner. If the plan participant is a "5 percent owner"
(as defined in the Code), distributions generally must begin no later than
April 1 of the calendar year following the calendar year in which the Owner
(or plan participant) reaches age 70 1/2. Each Owner is responsible for
requesting distributions under the Policy that satisfy applicable tax rules.

AUSA Life makes no attempt to provide more than general information about
use of the Policy with the various types of retirement plans. Purchasers of
Policies for use with any retirement plan should consult their legal counsel
and tax adviser regarding the suitability of the Policy.

Individual Retirement Annuities. In order to qualify as a Traditional
individual retirement annuity under Section 408(b) of the Code, a Policy must
contain certain provisions: (i) the Owner must be the Annuitant; (ii) the
Policy generally is not transferable by the Owner, e.g., the Owner may not
designate a new Owner, designate a Contingent Owner or assign the Policy as
collateral security; (iii) the total Premium Payments for any calendar year
may not exceed $2,000, except in the case of a rollover amount or contribution
under Section 402(c), 403(a)(4), 403(b)(8) or 408(d)(3) of the Code; (iv)
Annuity Payments or withdrawals must begin no later than April 1 of the
calendar year following the calendar year in which the Annuitant attains age
70 1/2; (v) an Annuity Payment Option with a Period Certain that will
guarantee Annuity Payments beyond the life expectancy of the Annuitant and the
Beneficiary may not be selected; and (vi) certain payments of Death Benefits
must be made in the event the Annuitant dies prior to the distribution of the
Annuity Purchase Value. Policies intended to qualify as Traditional individual
retirement annuities under Section 408(b) of the Code contain such provisions.
Amounts in the IRA (other than nondeductible contributions) are taxed when
distributed from the IRA. Distributions prior to age 59 1/2 (unless certain
exceptions apply) are subject to a 10% penalty tax.

Section 408 of the Code also indicates that no part of the funds for a
Traditional individual retirement account or annuity ("IRA") should be
invested in a life insurance contract, but the regulations thereunder allow
such funds to be invested in an annuity contract that provides a death benefit
that equals the greater of the premiums paid or the cash value for the
contract. The Policy provides an enhanced death benefit that could exceed the
amount of such a permissible death benefit, but it is unclear to what extent
such an enhanced death benefit could disqualify the Policy under Section 408
of the Code. The Internal Revenue Service has not reviewed the Policy for
qualification as an IRA, and has not addressed in a ruling of general
applicability whether an enhanced death benefit provision, such as the
provision in the Policy, comports with IRA qualification requirements.

Roth Individual Retirement Annuities (Roth IRA). The Roth IRA, under Section
408A of the Code, contains many of the same provisions as a Traditional IRA.
However, there are some differences. First, the contributions are not
deductible and must be made in cash or as a rollover or transfer from another
Roth IRA or other IRA. A rollover from or conversion of an IRA to a Roth IRA
may be subject to tax and other special rules may apply. You should consult a
tax adviser before combining any converted amounts with any other Roth IRA

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<PAGE>

contributions, including any other conversion amounts from other tax years.
The Roth IRA is available to individuals with earned income and whose adjusted
gross income is under $110,000 for single filers, $160,000 for married filing
jointly, and $10,000 for married filing separately. The amount per individual
that may be contributed to all IRAs (Roth and Traditional) is $2,000.
Secondly, the distributions are taxed differently. The Roth IRA offers tax-
free distributions when made from assets which have been held in the account
for 5 tax years and are made after attaining age 59 1/2, to pay for qualified
first time homebuyer expenses (lifetime maximum of $10,000) or due to death or
disability. All other distributions are subject to income tax when made from
earnings and may be subject to a premature withdrawal penalty tax unless an
exception applies. Unlike the Traditional IRA, there are no minimum required
distributions during the Owner's lifetime; however, required distributions at
death are the same.

Section 403(b) Plans. Under Section 403(b) of the Code, payments made by
public school systems and certain tax exempt organizations to purchase
Policies for their employees are excludable from the gross income of the
employee, subject to certain limitations. However, such payments may be
subject to FICA (Social Security) taxes. The Policy includes a Death Benefit
that in some cases may exceed the greater of the Premium Payments or the
Policy Value. The Death Benefit could be characterized as an incidental
benefit, the amount of which is limited in any tax-sheltered annuity under
section 403(b). Because the Death Benefit may exceed this limitation,
employers using the Policy in connection with such plans should consult their
tax adviser. Additionally, in accordance with the requirements of the Code,
Section 403(b) annuities generally may not permit distribution of (i) elective
contributions made in years beginning after December 31, 1988, and (ii)
earnings on those contributions and (iii) earnings on amounts attributed to
elective contributions held as of the end of the last year beginning before
January 1, 1989. Distributions of such amounts will be allowed only upon the
death of the employee, on or after attainment of age 59 1/2, separation from
service, disability, or financial hardship, except that income attributable to
elective contributions may not be distributed in the case of hardship.

Corporate Pension and Profit-Sharing Plans and H.R. 10 Plans. Section 401(a)
and 403(a) of the Code permit corporate employers to establish various types
of retirement plans for employees and self-employed individuals to establish
qualified plans for themselves and their employees. Such retirement plans may
permit the purchase of the Policies to accumulate retirement savings. Adverse
tax consequences to the plan, the participant, or both may result if the
Policy is assigned or transferred to any individual as a means to provide
benefit payments. The Policy includes a Death Benefit that in some cases may
exceed the greater of the Premium Payments or the Policy Value. The Death
Benefit could be characterized as an incidental benefit, the amount of which
is limited in any pension or profit-sharing plan. Because the Death Benefit
may exceed this limitation, employers using the Policy in connection with such
plans should consult their tax adviser.

Deferred Compensation Plans. Section 457 of the Code, while not actually
providing for a qualified plan as that term is normally used, provides for
certain deferred compensation plans with respect to service for state
governments, local governments, political sub-divisions, agencies,
instrumentalities and certain affiliates of such entities and tax exempt
organizations. The Policies can be used with such plans. Under such plans a
participant may specify the form of investment in which his or her
participation will be made. All such investments, however, are owned by, and
are subject to, the claims of the general creditors of the sponsoring
employer. Depending on the terms of the particular plan, the employer may be
entitled to draw on deferred amounts for purposes unrelated to its Section 457
plan obligations. In general, all amounts required under a Section 457 Plan
are taxable and are subject to federal income tax withholding as wages.

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<PAGE>

Non-natural Persons. Pursuant to Section 72(u) of the Code, an annuity
contract held by a taxpayer other than a natural person generally will not be
treated as an annuity contract under the Code; accordingly, an Owner who is
not a natural person will recognize as ordinary income for a taxable year the
excess of (i) the sum of the Annuity Purchase Value as of the close of the
taxable year and all previous distributions under the Policy over (ii) the sum
of the Premium Payments paid for the taxable year and any prior taxable year
and the amounts includable in gross income for any prior taxable year with
respect to the Policy. Notwithstanding the preceding sentences in this
paragraph, Section 72(u) of the Code does not apply to (i) a Policy the
nominal Owner of which is not a natural person but the beneficial Owner of
which is a natural person, (ii) a Policy acquired by the estate of a decedent
by reason of such decedent's death (iii) a Qualified Policy (other than one
qualified under Section 457) or (iv) a single-payment annuity the Annuity
Commencement Date for which is no later than one year from the date of the
single Premium Payment; such Policies are taxed as described above under the
heading "Taxation of Annuities."

Possible Changes in Taxation. Although the likelihood of legislative change
in uncertain, there is always the possibility that the tax treatment of the
Policies could change by legislation or other means. For instance, the
President's 1999 Budget Proposal recommended legislation that, if enacted,
would adversely modify the federal taxation of the Policies. It is also
possible that any change could be retroactive (that is, effective prior to the
date of the change). A tax adviser should be consulted with respect to
legislative developments and their effect on the Policy.

DISTRIBUTOR OF THE POLICIES

AFSG Securities Corporation, 4333 Edgewood Road N.E., Cedar Rapids, IA
52499-0001, is the principal underwriter of the Policies. AFSG Securities
Corporation has entered or will enter into one or more agreements with various
broker-dealers for the distribution of the Policies. Commissions on Policy
sales are paid to broker/dealers. Commissions payable to broker/dealers will
be up to 6% of Premium Payments. In addition, certain broker/dealers may
receive additional commissions or expense allowances based upon sales volume,
agent or service training responsibilities, and other factors. These
commissions and expense allowances are not deducted from Premium Payments,
they are paid by AUSA Life.

VOTING RIGHTS

To the extent required by law, AUSA Life will vote the Underlying Funds
shares held by the Mutual Fund Account at regular and special shareholder
meetings of the Underlying Funds in accordance with instructions received from
persons having voting interests in the portfolios (although the Underlying
Funds do not hold regular annual shareholders meetings). If, however, the 1940
Act or any regulation thereunder should be amended or if the present
interpretation thereof should change, and as a result AUSA Life determines
that it is permitted to vote the Underlying Funds' shares in its own right, it
may elect to do so.

Before the Annuity Commencement Date, the Policy Owner holds the voting
interest in the selected Portfolios. The number of votes that an Owner has the
right to instruct will be calculated separately for each Subaccount. The
number of votes that an Owner has the right to instruct for a particular
Subaccount will be determined by dividing his or her Annuity Purchase Value in
the Subaccount by the net asset value per share of the corresponding Portfolio
in which the Subaccount invests. Fractional shares will be counted.

After the Annuity Commencement Date, the person receiving Annuity Payments
has the voting interest, and the number of votes decreases as Annuity Payments
are made and as the reserves for the Policy decrease. The person's number of
votes will be determined by dividing the reserve for the Policy allocated to
the applicable Subaccount by the net asset value per share of the
corresponding Portfolio. Fractional shares will be counted.

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<PAGE>

The number of votes that the Owner or person receiving income payments has
the right to instruct will be determined as of the date established by the
Underlying Funds for determining shareholders eligible to vote at the meeting
of the Underlying Funds. AUSA Life will solicit voting instructions by sending
Owners or other persons entitled to vote written requests for instructions
prior to that meeting in accordance with procedures established by the
Underlying Funds. Portfolio shares as to which no timely instructions are
received and shares held by AUSA Life in which Owners or other persons
entitled to vote have no beneficial interest will be voted in proportion to
the voting instructions that are received with respect to all Policies
participating in the same Subaccount.

Each person having a voting interest in a Subaccount will receive proxy
material, reports, and other materials relating to the appropriate Portfolio.

YEAR 2000 MATTERS

In October, 1996, AUSA Life adopted and presently has in place a Year 2000
Assessment and Planning Project (the "Plan") to review and analyze existing
hardware and software systems, as well as voice and data communications
systems, to determine if they are Year 2000 compatible. The Plan provides for
a management process which ensures that when a particular system, or software
application, is determined to be "non-compliant" the proper steps are in place
to either remedy the "non-compliance" or cease using the particular system or
software. The Plan also provides that the Chief Information Officer report to
the Board of Directors as to the status of the efforts under the Plan on a
regular and routine basis. AUSA Life has engaged the services of a third-party
provider that is specialized in Year 2000 issues to work on the project.

The Plan has four specific objectives (1) develop an inventory of all
applications; (2) evaluate all applications in the inventory to determine the
most prudent manner to move them to Year 2000 compliance, if required; (3)
estimate budgets, resources and schedules for the migration of the "affected"
applications to Year 2000 compliance; and (4) define testing and deployment
requirements to successfully manage validation and re-deployment of any
changed code. It is anticipated that all compliance issues will be resolved by
December 1998.

As of the date of this Prospectus, AUSA Life has identified and made
available what it believes are the appropriate resources of hardware, people,
and dollars, including the engagement of outside third parties, to ensure that
the Plan will be completed.

The Year 2000 computer problem, and its resolution, is complex and
multifaceted, and the success of a response plan cannot be conclusively known
until the Year 2000 is reached (or an earlier date to the extent that the
systems or equipment addresses Year 2000 data prior to the Year 2000). Even
with appropriate and diligent pursuit of a well-conceived response plan,
including testing procedures, there is no certainty that any company will
achieve complete success. Further, notwithstanding its efforts or results,
AUSA Life's ability to function unaffected to and through the Year 2000 may be
adversely affected by actions (or failure to act) of third parties beyond its
knowledge or control.

LEGAL PROCEEDINGS

There are no legal proceedings to which the Mutual Fund Account is a party
or to which the assets of the Account are subject. AUSA Life, like other life
insurance companies, is a defendant in lawsuits. In some class action and
other lawsuits involving other insurers, substantial damages have been sought
and/or material settlement payments have been made. Although the outcome of
any litigation cannot be predicted with certainty, AUSA Life believes that at
the present time there are no pending or threatened lawsuits that are
reasonably likely to have a material adverse impact on the Mutual Fund Account
or AUSA Life.

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<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

A Statement of Additional Information is available (at no cost) which
contains more details concerning the subjects discussed in this Prospectus. The
following is the Table of Contents for that Statement:

TABLE OF CONTENTS

<TABLE>
<S> <C>
The Policy--General Provisions
Owner.................................................................... 3
Entire Policy............................................................ 3
Delay of Payment and Transfers........................................... 3
Misstatement of Age or Sex............................................... 4
Reallocation of Annuity Purchase Values After the Annuity Commencement
Date.................................................................... 4
Assignment............................................................... 4
Evidence of Survival..................................................... 4
Amendments............................................................... 4
Federal Tax Matters........................................................ 5
Tax Status of the Policy................................................. 5
Taxation of AUSA Life.................................................... 5
Investment Experience...................................................... 6
Historical Performance Data................................................ 9
Money Market Yields...................................................... 9
Other Subaccount Yields.................................................. 10
Total Returns............................................................ 11
Other Performance Data................................................... 12
State Regulation of AUSA Life.............................................. 12
Records and Reports........................................................ 12
Distribution of the Policies............................................... 12
Custody of Assets.......................................................... 13
Legal Matters.............................................................. 13
Independent Auditors....................................................... 13
Other Information.......................................................... 13
Financial Statements....................................................... 13
</TABLE>

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<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

THE ENDEAVOR VARIABLE ANNUITY

Issued through

AUSA ENDEAVOR VARIABLE
ANNUITY ACCOUNT

Offered by
AUSA LIFE INSURANCE COMPANY, INC.

666 Fifth Avenue
New York, New York 10103

This Statement of Additional information expands upon subjects discussed in
the current Prospectus for the Endeavor Variable Annuity (the "Policy")
offered by AUSA Life Insurance Company, Inc. ("AUSA Life"). You may obtain a
copy of the Prospectus dated May 1, 1998, by calling 1-800-525-6205, or by
writing to the Service Office, Financial Markets Division--Variable Annuity
Dept., 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499-0001. Terms used in
the current Prospectus for the Policy are incorporated in this Statement of
Additional Information.

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE
READ ONLY IN CONJUNCTION WITH THE PROSPECTUSES FOR THE POLICY, ENDEAVOR SERIES
TRUST AND THE GROWTH PORTFOLIO OF THE WRL SERIES FUND, INC.

Dated: May 1, 1998

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<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
THE POLICY--GENERAL PROVISIONS.............................................. 3
Owner..................................................................... 3
Entire Policy............................................................. 3
Delay of Payment and Transfers............................................ 3
Misstatement of Age or Sex................................................ 4
Reallocation of Policy Values After the Annuity Commencement Date......... 4
Assignment................................................................ 4
Evidence of Survival...................................................... 4
Amendments................................................................ 4
FEDERAL TAX MATTERS......................................................... 5
Tax Status of the Policy.................................................. 5
Taxation of AUSA Life..................................................... 5
INVESTMENT EXPERIENCE....................................................... 6
HISTORICAL PERFORMANCE DATA................................................. 9
Money Market Yields....................................................... 9
Other Subaccount Yields................................................... 10
Total Returns............................................................. 11
Other Performance Data.................................................... 12
STATE REGULATION OF AUSA LIFE............................................... 12
RECORDS AND REPORTS......................................................... 12
DISTRIBUTION OF THE POLICIES................................................ 12
CUSTODY OF ASSETS........................................................... 13
LEGAL MATTERS............................................................... 13
INDEPENDENT AUDITORS........................................................ 13
OTHER INFORMATION........................................................... 13
FINANCIAL STATEMENTS........................................................ 13
</TABLE>

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<PAGE>

In order to supplement the description in the Prospectus, the following
provides additional information about AUSA Life and the Policy which may be of
interest to an Owner.

THE POLICY--GENERAL PROVISIONS

OWNER

The Policy shall belong to the Policy Owner upon issuance of the Policy
after completion of an application and delivery of the initial Premium
Payment. While the Annuitant is living, the Owner may: (1) assign the Policy;
(2) surrender the Policy; (3) amend or modify the Policy with AUSA Life's
consent; (4) receive annuity payments or name a Payee to receive the payments;
and (5) exercise, receive and enjoy every other right and benefit contained in
the Policy. The exercise of these rights may be subject to the consent of any
assignee or irrevocable Beneficiary.

A Successor Owner can be named in the Policy application or in a Written
Notice. The Successor Owner will become the new Owner upon the Owner's death,
if the Owner predeceases the Annuitant. If no Successor Owner survives the
Owner and the Owner predeceases the Annuitant, the Owner's estate will become
the Owner.

The Owner may change the ownership of the Policy in a Written Notice. When
this change takes effect, all rights of ownership in the Policy will pass to
the new Owner. A change of ownership may have adverse tax consequences.

When there is a change of Owner or Successor Owner, the change will take
effect as of the date the Owner signs the Written Notice, subject to any
payment AUSA Life has made or action AUSA Life has taken before recording the
change. Changing the Owner or naming a new Successor Owner cancels any prior
choice of Successor Owner, but does not change the designation of the
Beneficiary or the Annuitant.

If ownership is transferred (except to the Owner's spouse) because the Owner
dies before the Annuitant, the Cash Value generally must be distributed to the
Successor Owner within five years of the Owner's death, or payments must be
made for a period certain or for the Successor Owner's lifetime so long as any
period certain does not exceed that Successor Owner's life expectancy, if the
first payment begins within one year of the Owner's death.

ENTIRE POLICY

The Policy and any endorsements thereon and the Policy application
constitute the entire contract between AUSA Life and the Owner. All statements
in the application are representations and not warranties. No statement will
cause the Policy to be void or to be used in defense of a claim unless
contained in the application.

DELAY OF PAYMENT AND TRANSFERS

Payment of any amount due from the Mutual Fund Account in respect of a
surrender, the Death Benefit or the death of the Owner of a Nonqualified
Policy generally will occur within seven business days from the date the
Written Notice (and any other required documentation or information) is
received, except that AUSA Life may be permitted to defer such payment from
the Mutual Fund Account if: (1) the New York Stock Exchange is closed for
other than usual weekends or holidays or trading on the Exchange is otherwise
restricted; or (2) an emergency exists as defined by the SEC or the SEC
requires that trading be restricted; or (3) the SEC permits a delay for the
protection of Owners. In addition, transfers of amounts from the Subaccounts
may be deferred under these circumstances.

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<PAGE>

Certain delays and restrictions apply to transfers of amounts out of the
Fixed Account. (See "THE ENDEAVOR ACCOUNTS--The Fixed Account," p. of the
Policy Prospectus.)

MISSTATEMENT OF AGE OR SEX

If the age or sex of the Annuitant has been misstated, AUSA Life will change
the annuity benefit payable to that which the Premium Payments would have
purchased for the correct age or sex. The dollar amount of any underpayment
made by AUSA Life shall be paid in full with the next payment due such person
or the Beneficiary. The dollar amount of any overpayment made by AUSA Life due
to any misstatement shall be deducted from payments subsequently accruing to
such person or Beneficiary. Any underpayment or overpayment will include
interest at 5% per year, from the date of the wrong payment to the date of the
adjustment. The age of the Annuitant may be established at any time by the
submission of proof satisfactory to AUSA Life.

REALLOCATION OF ANNUITY UNITS AFTER THE ANNUITY COMMENCEMENT DATE

After the Annuity Commencement Date, the Policy Owner may reallocate the
value of a designated number of Annuity Units of a Subaccount of the Mutual
Fund Account then credited to a Policy into an equal value of Annuity Units of
one or more other Subaccounts of the Mutual Fund Account. The reallocation
shall be based on the relative value of the Annuity Units of the Subaccount(s)
at the end of the Business Day on the next payment date. The minimum amount
which may be reallocated is the lesser of (1) $10 of monthly income or (2) the
entire monthly income of the Annuity Units in the Subaccount from which the
transfer is being made. If the monthly income of the Annuity Units remaining
in a Subaccount after a reallocation is less than $10, AUSA Life reserves the
right to include the value of those Annuity Units as part of the transfer. The
request must be in writing to AUSA Life's Service Office. There is no charge
assessed in connection with such reallocation. AUSA Life reserves the right to
limit the number of times a reallocation of Annuity Units may be made in any
given Policy Year.

ASSIGNMENT

During the lifetime of the Annuitant the Policy Owner may assign any rights
or benefits provided by the Policy. An assignment will not be binding on AUSA
Life until a copy has been filed at its Service Office. The rights and
benefits of the Policy Owner and Beneficiary are subject to the rights of the
assignee. AUSA Life assumes no responsibility for the validity or effect of
any assignment. Any claim made under an assignment shall be subject to proof
of interest and the extent of the assignment. An assignment may have tax
consequences.

Unless the Policy Owner so directs by filing written notice with AUSA Life,
no Beneficiary may assign any payments under the Policy before they are due.
To the extent permitted by law, no payments will be subject to the claims of
any Beneficiary's creditors.

EVIDENCE OF SURVIVAL

AUSA Life reserves the right to require satisfactory evidence that a person
is alive if a payment is based on that person being alive. No payment will be
made until AUSA Life receives such evidence.

AMENDMENTS

No change in the Policy is valid unless made in writing by AUSA Life and
approved by one of AUSA Life's officers. No Registered Representative has
authority to change or waive any provision of the Policy.

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<PAGE>

AUSA Life reserves the right to amend the Policies to meet the requirements
of the Internal Revenue Code, regulations or published rulings. An Owner can
refuse such a change by giving Written Notice, but a refusal may result in
adverse tax consequences.

FEDERAL TAX MATTERS

TAX STATUS OF THE POLICY

Distribution Requirements. The Code also requires that Nonqualified Policies
contain specific provisions for distribution of Policy proceeds upon the death
of the Owner. In order to be treated as an annuity contract for federal income
tax purposes, the Code requires that such Policies provide that if any Owner
dies on or after the Annuity Commencement Date and before the entire interest
in the Policy has been distributed, the remaining portion must be distributed
at least as rapidly as under the method in effect on such Owner's death. If
any Owner dies before the Annuity Commencement Date, the entire interest in
the Policy must generally be distributed within 5 years after such Owner's
date of death or be applied to provide an immediate annuity under which
payments will begin within one year of such Owner's death and will be made for
the life of the Beneficiary or for a period not extending beyond the life
expectancy of the "Designated Beneficiary" as defined in Section 72(s) of the
Code. However, if upon such Owner's death prior to the Annuity Commencement
Date, such Owner's surviving spouse becomes the sole new Owner under the
Policy, then the Policy may be continued with the surviving spouse as the new
Owner. Under the Policy, the Beneficiary is the Designated Beneficiary of an
Owner/Annuitant and the Successor Owner is the Designated Beneficiary of an
Owner who is not the Annuitant. If any Owner is not a natural person, then for
purposes of these distribution requirements, the primary Annuitant shall be
treated as the Owner, and any death or change of such primary Annuitant shall
be treated as the death of the Owner. The Nonqualified Policies contain
provisions intended to comply with these requirements of the Code. No
regulations interpreting these requirements of the Code have yet been issued
and thus no assurance can be given that the provisions contained in the
Policies satisfy all such Code requirements. The provisions contained in the
Policies will be reviewed and modified if necessary to maintain their
compliance with the Code requirements when clarified by regulation or
otherwise.

TAXATION OF AUSA LIFE

AUSA Life at present is taxed as a life insurance company under part I of
Subchapter L of the Code. The Mutual Fund Account is treated as part of AUSA
Life and, accordingly, will not be taxed separately as a "regulated investment
company" under Subchapter M of the Code. AUSA Life does not expect to incur
any federal income tax liability with respect to investment income and net
capital gains arising from the activities of the Mutual Fund Account retained
as part of the reserves under the Policy. Based on this expectation, it is
anticipated that no charges will be made against the Mutual Fund Account for
federal income taxes. If, in future years, any federal income taxes are
incurred by AUSA Life with respect to the Mutual Fund Account, AUSA Life may
make a charge to the Mutual Fund Account.

- 5 -
<PAGE>

INVESTMENT EXPERIENCE

An "Investment Experience Factor" is used to determine the value of
Accumulation Units and Annuity Units, and to determine Annuity Payment rates.

ACCUMULATION UNITS

Upon allocation to the selected Subaccount of the Mutual Fund Account,
Premium Payments are converted into Accumulation Units of the Subaccount. The
number of Accumulation Units to be credited is determined by dividing the
dollar amount allocated to each Subaccount by the value of an Accumulation
Unit for that Subaccount as next determined after the Premium Payment is
received at the Service Office or, in the case of the initial Premium Payment,
when the Policy application is completed, whichever is later. The value of an
Accumulation Unit was arbitrarily established at $1 (except the WRL Growth
Subaccount which was established at $10) at the inception of each Subaccount.
Thereafter, the value of an Accumulation Unit is determined as of the close of
trading on each day the New York Stock Exchange is open for business.

An index (the "Investment Experience Factor") which measures the investment
performance of a Subaccount during a Valuation Period is used to determine the
value of an Accumulation Unit for the next subsequent Valuation Period. The
Investment Experience Factor may be greater or less than or equal to one;
therefore, the value of an Accumulation Unit may increase, decrease or remain
the same from one Valuation Period to the next. The Policy Owner bears this
investment risk. The Net Investment Performance of a Subaccount and deduction
of certain charges affects the Accumulation Unit Value.

The Investment Experience Factor for any Subaccount for any Valuation Period
is determined by dividing (a) by (b), and subtracting (c) from the result,
where:

(a) is the net result of:

(1) the net asset value per share of the shares held in the
Subaccount determined at the end of the current Valuation Period, plus

(2) The per share amount of any dividend or capital gain distribution
made with respect to the shares held in the Subaccount if the ex-
dividend date occurs during the current Valuation Period, plus or minus

(3) a per share credit or charge for any taxes determined by AUSA
Life to have resulted from the investment operations of the Subaccount
and for which it has created a reserve;

(b) is the net asset value per share of the shares held in the Subaccount
determined as of the end of the immediately preceding Valuation Period; and

(c) is the charge for mortality and expense risk during the Valuation
Period equal on an annual basis to X percent of the daily net asset value
of the Subaccount, where "X" depends on the Death Benefit Option and Policy
Year, plus the .15% annual administrative charge.

- 6 -
<PAGE>

ILLUSTRATION OF ACCUMULATION UNIT VALUE CALCULATIONS

FORMULA AND ILLUSTRATION FOR DETERMINING THE INVESTMENT EXPERIENCE FACTOR
(ASSUMES THE RETURN OF PREMIUM DEATH BENEFIT IS STILL IN EFFECT AND THAT THE
POLICY IS WITHIN THE FIRST SEVEN POLICY YEARS.)

Investment Experience Factor = (A + B - C) - E
D

Where: The Net Asset Value of an Underlying Fund share as of the end of
A = the current Valuation Period.
Assume..........................................A = $11.57

B = The per share amount of any dividend or capital gains distribution
since the end of the immediately preceding Valuation Period.
Assume...............................................B = 0

C = The per share charge or credit for any taxes reserved for at the
end of the current Valuation Period.
Assume...............................................C = 0

D = The Net Asset Value of an Underlying Fund share at the end of the
immediately preceding Valuation Period.
Assume..........................................D = $11.40

E = The daily deduction for Mortality and Expense Risk Fees and
Administrative Charges, which totals 1.40% on an annual basis.
On a daily basis = .0000380909

Then, the Investment Experience Factor = (11.57 + 0 - 0) -
.0000380909 = Z = 1.0148741898
11.40

FORMULA AND ILLUSTRATION FOR DETERMINING ACCUMULATION UNIT VALUE

Accumulation Unit Value = A X B

Where: The Accumulation Unit Value for the immediately preceding
A = Valuation Period.
Assume.............................................. = $ X

B = The Net Investment Factor for the current Valuation Period.
Assume................................................ = Y

Then, the Accumulation Unit Value = $ X X Y = $ Z

ANNUITY UNIT VALUE AND ANNUITY PAYMENT RATES

The amount of Variable Annuity Payments will vary with Annuity Unit Values.
Annuity Unit Values rise if the net investment performance of the Subaccount
exceeds the Assumed Investment Return of 5% annually. Conversely, Annuity Unit
Values fall if the net investment performance of the Subaccount is less than
the Assumed Investment Return. The value of a Variable Annuity Unit in each
Subaccount was established at $1.00 on the date operations began for that
Subaccount. The value of a Variable Annuity Unit on any subsequent Business
Day is equal to (a) multiplied by (b) multiplied by (c), where:

(a) is the variable Annuity Unit Value on the immediately preceding
Business Day;

- 7 -
<PAGE>

(b) is the net investment factor of the valuation period; and

The investment result adjustment factor for the valuation period is the
product of discount factors of .99986634 per day to recognize the 5% effective
annual Assumed Investment Return. The valuation period is the period from the
close of the immediately preceding Business Day to the close of the current
Business Day.

The net investment factor for the Policy used to calculate the value of a
variable Annuity Unit in each Subaccount for the valuation period is
determined by dividing (i) by (ii), and subtracting (iii) from the result,
where:

(i) is the result of:

(1) the net asset value of a fund share held in the Mutual Fund
Account for that Subaccount determined at the end of the current
valuation period; plus

(2) the per share amount of any dividend or capital gain
distributions made by the fund for shares held in the Mutual Fund
Account for that Subaccount if the ex-dividend date occurs during the
valuation period.

(ii) is the net asset value of a fund share held in the Mutual Fund
Account for that Subaccount determined as of the end of the immediately
preceding valuation period.

(iii) is a factor representing the Mortality and Expense Risk Fee and
Administrative Charge. Assume this factor is currently equal, on an annual
basis, to no more than 1.55% of the daily net asset value of a fund share
held in the Mutual Fund Account for that Subaccount.

The dollar amount of subsequent Variable Annuity Payments will depend upon
changes in applicable Annuity Unit Values.

The annuity payment rates vary according to the Annuity Option elected and
the sex and adjusted age of the Annuitant at the Annuity Commencement Date.
The Policy also contains a table for determining the adjusted age of the
Annuitant.

ILLUSTRATION OF CALCULATIONS FOR ANNUITY UNIT VALUE
AND VARIABLE ANNUITY PAYMENTS

FORMULA AND ILLUSTRATION FOR DETERMINING ANNUITY UNIT VALUE

Annuity Unit Value = A X B X C

Where: Annuity Unit Value for the immediately preceding Valuation Period.
A = Assume.............................................. = $ X

B = Investment Experience Factor for the Valuation Period for which
the Annuity Unit value is being calculated.
Assume................................................ = Y

C = A factor to neutralize the Assumed Investment Return of 5% built
into the Annuity Tables used.
Assume................................................ = Z

Then, the Annuity Unit Value is:
$ X X Y X Z = $ Q

- 8 -
<PAGE>

FORMULA AND ILLUSTRATION FOR DETERMINING AMOUNT OF FIRST MONTHLY VARIABLE
ANNUITY PAYMENT

First Monthly Variable Annuity Payment = A X B
$1,000

Where: The Annuity Purchase Value as of the Annuity Commencement Date.
A = Assume.............................................. = $ X

B = The Annuity purchase rate per $1,000 based upon the option
selected, the sex and adjusted age of the Annuitant according to
the tables contained in the Policy.
Assume.............................................. = $ Y

Then, the first Monthly Variable Annuity Payment = $ X X $ Y = $ Z
1,000

FORMULA AND ILLUSTRATION FOR DETERMINING THE NUMBER OF ANNUITY UNITS
REPRESENTED BY EACH MONTHLY VARIABLE ANNUITY PAYMENT

Number of Annuity Units = A
B

Where: The dollar amount of the first monthly Variable Annuity Payment.
A = Assume.............................................. = $ X

B = The Annuity Unit Value for the Valuation Date on which the first
monthly payment is due.
Assume.............................................. = $ Y

Then, the number of Annuity Units = $ X = Z
$ Y

HISTORICAL PERFORMANCE DATA

MONEY MARKET YIELDS

AUSA Life may from time to time disclose the current annualized yield of the
Endeavor Money Market Subaccount, which invests in the Endeavor Money Market
Portfolio, for a 7-day period in a manner which does not take into
consideration any realized or unrealized gains or losses on shares of the
Endeavor Money Market Portfolio or on its portfolio securities. This current
annualized yield is computed by determining the net change (exclusive of
realized gains and losses on the sale of securities and unrealized
appreciation and depreciation and income other than investment income) at the
end of the 7-day period in the value of a hypothetical account; having a
balance of 1 unit of the Endeavor Money Market Subaccount at the beginning of
the 7-day period, dividing such net change in account value by the value of
the account at the beginning of the period to determine the base period
return, and annualizing this quotient on a 365-day basis. The net change in
account value reflects (i) net income from the Portfolio attributable to the
hypothetical account; and (ii) charges and deductions imposed under a Policy
that are attributable to the hypothetical account. The charges and deductions
include the per unit charges for the

- 9 -
<PAGE>

hypothetical account for (i) the Administrative Charges; and (ii) the
Mortality and Expense Risk Charge. Current Yield will be calculated according
to the following formula:

Current Yield = ((NCS - ES)/UV) X (365/7)

Where:

NCS=

The net change in the value of the Portfolio (exclusive of realized
gains and losses on the sale of securities and unrealized
appreciation and depreciation and income other than investment
income) for the 7-day period attributable to a hypothetical account
having a balance of 1 Subaccount unit.

ES=

Per unit expenses of the Subaccount for the 7-day period.

UV=

The unit value on the first day of the 7-day period.

Because of the charges and deductions imposed under a Policy, the yield for
the Endeavor Money Market Subaccount will be lower than the yield for the
Endeavor Money Market Portfolio. The yield calculations do not reflect the
effect of any premium taxes or Contingent Deferred Sales Charges that may be
applicable to a particular Policy. Contingent Deferred Sales Charges range
from 7% to 0% of the amount of premium withdrawn based on the Policy Year
since payment of the premium.

AUSA Life may also disclose the effective yield of the Endeavor Money Market
Subaccount for the same 7-day period, determined on a compounded basis. The
effective yield is calculated by compounding the base period return according
to the following formula:

Effective Yield = (1 + ((NCS - ES)/UV) X (365/7) - 1

Where:

NCS=

ES=

Per unit expenses of the Subaccount for the 7-day period.

UV=

The unit value on the first day of the 7-day period.

The yield on amounts held in the Endeavor Money Market Subaccount normally
will fluctuate on a daily basis. Therefore, the disclosed yield for any given
past period is not an indication or representation of future yields or rates
of return. The Endeavor Money Market Subaccount's actual yield is affected by
changes in interest rates on money market securities, average portfolio
maturity of the Endeavor Money Market Portfolio, the types and quality of
portfolio securities held by the Endeavor Money Market Portfolio and its
operating expenses. For the seven days ended December 31, 1997, the yield of
the Endeavor Money Market Subaccount was 3.182%, and the effective yield was
3.232%.

OTHER SUBACCOUNT YIELDS

AUSA Life may from time to time advertise or disclose the current annualized
yield of one or more of the Subaccounts of the Mutual Fund Account (except the
Endeavor Money Market Subaccount) for 30-day periods. The annualized yield of
a Subaccount refers to income generated by the Subaccount over a specific 30-
day period. Because the yield is annualized, the yield generated by a
Subaccount during the 30-day period is assumed to be generated each 30-day
period over a 12-month period. The yield is computed by: (i) dividing the net
investment income of the Subaccount less Subaccount expenses for the period,
by (ii) the maximum offering price per unit on the last day of the period
times the daily average number of units outstanding for the period, (iii)
compounding that yield for a 6-month period, and (iv) multiplying that result
by 2.

- 10 -
<PAGE>

Expenses attributable to the Subaccount include (i) the Administrative Charge
and (ii) the Mortality and Expense Risk Charge. The 30-day yield is calculated
according to the following formula:

Yield = 2 X ((((NI - ES)/(U R UV)) + 1)/6/ - 1)

Where:

NI=

Net investment income of the Subaccount for the 30-day period
attributable to the Subaccount's unit.

ES=

Expenses of the Subaccount for the 30-day period.

The average number of units outstanding.

UV=

The unit value at the close (highest) of the last day in the 30-day
period.

Because of the charges and deductions imposed by the Mutual Fund Account,
the yield for a Subaccount of the Mutual Fund Account will be lower than the
yield for its corresponding Portfolio. The yield calculations do not reflect
the effect of any premium taxes that may be applicable to a particular Policy.
Contingent Deferred Sales Charges range from 7% to 0% of the amount of the
Excess Premium Withdrawal based on the number of years since payment of the
premium.

The yield on amounts held in the Subaccounts of the Mutual Fund Account
normally will fluctuate over time. Therefore, the disclosed yield for any
given past period is not an indication or representation of future yields or
rates of return. A Subaccount's actual yield is affected by the types and
quality of its investments and its operating expenses.

TOTAL RETURNS

AUSA Life may from time to time also advertise or disclose total returns for
one or more of the Subaccounts of the Mutual Fund Account for various periods
of time. One of the periods of time will include the period measured from the
date the Subaccount commenced operations. When a Subaccount has been in
operation for 1, 5 and 10 years, respectively, the total return for these
periods will be provided. Total returns for other periods of time may from
time to time also be disclosed. Total returns represent the average annual
compounded rates of return that would equate an initial investment of $1,000
to the redemption value of that investment as of the last day of each of the
periods. The ending date for each period for which total return quotations are
provided will be for the most recent month end practicable, considering the
type and media of the communication and will be stated in the communication.

Total returns will be calculated using Subaccount Unit Values which AUSA
Life calculates on each Business Day based on the performance of the
Subaccount's underlying Portfolio, and the deductions for the Mortality and
Expense Risk Fee and the Administrative Charges. Total return calculations
will reflect the effect of Contingent Deferred Sales Charges that may be
applicable to a particular period. The total return will then be calculated
according to the following formula:

P(1 + T)N = ERV

Where:

The average annual total return net of Subaccount recurring charges.

ERV=

The ending redeemable value of the hypothetical account at the end of
the period.

A hypothetical initial payment of $1,000.

The number of years in the period.

- 11 -
<PAGE>

OTHER PERFORMANCE DATA

AUSA Life may from time to time also disclose average annual total returns
in a non-standard format in conjunction with the standard format described
above. The non-standard format will be identical to the standard format except
that the Contingent Deferred Sales Charge percentage will be assumed to be 0%.

AUSA Life may from time to time also disclose cumulative total returns in
conjunction with the standard format described above. The cumulative returns
will be calculated using the following formula assuming that the Contingent
Deferred Sales Charge percentage will be 0%.

CTR = (ERV/P) - 1

Where:

CTR=

The cumulative total return net of Subaccount recurring charges for
the period.

ERV=

The ending redeemable value of the hypothetical investment at the end
of the period.

A hypothetical initial payment of $1,000.

All non-standard performance data will only be advertised if the standard
performance data for the same period, as well as for the required period, is
also disclosed.

STATE REGULATION OF AUSA LIFE

AUSA Life is subject to the laws of New York governing insurance companies
and to regulation by the New York Department of Insurance. An annual statement
in a prescribed form is filed with the Department of Insurance each year
covering the operation of AUSA Life for the preceding year and its financial
condition as of the end of such year. Regulation by the Department of
Insurance includes periodic examination to determine AUSA Life's contract
liabilities and reserves so that the Department may determine the items are
correct. AUSA Life's books and accounts are subject to review by the
Department of Insurance at all times and a full examination of its operations
is conducted periodically by the National Association of Insurance
Commissioners. In addition, AUSA Life is subject to regulation under the
insurance laws of other jurisdictions in which it may operate.

RECORDS AND REPORTS

All records and accounts relating to the Mutual Fund Account will be
maintained by AUSA Life. As presently required by the Investment Company Act
of 1940 and regulations promulgated thereunder, AUSA Life will mail to all
Policy Owners at their last known address of record, at least annually,
reports containing such information as may be required under that Act or by
any other applicable law or regulation. Policy Owners will also receive
confirmation of each financial transaction and any other reports required by
law or regulation.

DISTRIBUTION OF THE POLICIES

The Policies are offered to the public through brokers licensed under the
federal securities laws and state insurance laws. The offering of the Policies
is continuous and AUSA Life does not anticipate discontinuing the offering of
the Policies. However, AUSA Life reserves the right to discontinue the
offering of the Policies.

AFSG Securities Corporation, is the principal underwriter of the Policies.
AFSG Securities Corporation will enter into agreements with broker-dealers for
the distribution of the Policies.

- 12 -
<PAGE>

Prior to May 1, 1998, AEGON USA Securities, Inc. was the principal
underwriter. During 1997, the amount paid to AEGON USA Securities, Inc. and/or
broker-dealers for their services was $1,430,319.48. Amount paid for these
services in 1996 and 1995 were $1,115,508 and $397,382, respectively. No fees
had been paid to AEGON USA Securities, Inc. and/or the broker/dealers for
their services during 1994 or prior years.

CUSTODY OF ASSETS

The assets of each of the Subaccounts of the Mutual Fund Account are held by
AUSA Life. The assets of each of the Subaccounts of the Mutual Fund Account
are segregated and held separate and apart from the assets of the other
Subaccounts and from AUSA Life's general account assets. AUSA Life maintains
records of all purchases and redemptions of shares of the Underlying Funds
held by each of the Subaccounts. Additional protection for the assets of the
Mutual Fund Account is afforded by AUSA Life's fidelity bond, presently in the
amount of $5,000,000, covering the acts of officers and employees of AUSA
Life.

LEGAL MATTERS

Legal advice relating to certain matters under the federal securities laws
applicable to the issue and sale of the Policies has been provided to AUSA
Life by Sutherland, Asbill & Brennan, LLP, of Washington D.C.

INDEPENDENT AUDITORS

The Financial Statements of AUSA Life, at December 31, 1997 and 1996, and
for each of the three years in the period ended December 31, 1997, and the
Financial Statements of AUSA Endeavor Variable Annuity Account at December 31,
1997, and for each of the two years in the period then ended, included in this
Statement of Additional Information have been audited by Ernst & Young LLP,
Independent Auditors, 801 Grand Avenue, Suite 3400, Des Moines, Iowa, 50309-
2764.

OTHER INFORMATION

A Registration Statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933 as amended, with respect to the
Policies discussed in this Statement of Additional Information. Not all of the
information set forth in the Registration Statement, amendments and exhibits
thereto has been included in the Prospectus or this Statement of Additional
Information. Statements contained in the Prospectus and this Statement of
Additional Information concerning the content of the Policies and other legal
instruments are intended to be summaries. For a complete statement of the
terms of these documents, reference should be made to the instruments filed
with the Securities and Exchange Commission.

FINANCIAL STATEMENTS

The values of the interest of Policy Owners in the Mutual Fund Account will
be affected solely by the investment results of the selected Subaccount(s).
Financial statements for the AUSA Endeavor Variable Annuity Account are
contained herein. The Financial Statements of AUSA Life, which are included in
this Statement of Additional Information, should be considered only as bearing
on the ability of AUSA Life to meet its obligations under the Policies. They
should not be considered as bearing on the investment performance of the
assets held in the Mutual Fund Account.

- 13 -
<PAGE>

FINANCIAL STATEMENTS - STATUTORY BASIS

AUSA LIFE INSURANCE COMPANY, INC.

YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
WITH REPORT OF INDEPENDENT AUDITORS

<PAGE>

AUSA Life Insurance Company, Inc.

Financial Statements - Statutory Basis

Years ended December 31, 1997, 1996 and 1995

CONTENTS

<TABLE>
<CAPTION>
<S> <C>
Report of Independent Auditors................................. 1

Audited Financial Statements

Balance Sheets - Statutory Basis............................... 3
Statements of Operations - Statutory Basis..................... 5
Statements of Changes in Capital and Surplus - Statutory Basis. 6
Statements of Cash Flows - Statutory Basis..................... 7
Notes to Financial Statements - Statutory Basis................ 8
</TABLE>
<PAGE>

[LETTERHEAD OF ERNST & YOUNG APPEARS HERE]

Report of Independent Auditors

The Board of Directors
AUSA Life Insurance Company, Inc.

We have audited the accompanying statutory-basis balance sheets of AUSA Life
Insurance Company, Inc. as of December 31, 1997 and 1996, and the related
statutory-basis statements of operations, changes in capital and surplus, and
cash flows for each of the three years in the period ended December 31, 1997.
Our audits also included the accompanying statutory-basis financial statement
schedules pursuant to Article 7 of Regulation S-X. These financial statements
and schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the Department of Insurance of the State of New York, which
practices differ from generally accepted accounting principles. The variances
between such practices and generally accepted accounting principles also are
described in Note 1. The effects on the financial statements of these variances
are not reasonably determinable but are presumed to be material.

In our opinion, because of the effects of the matters described in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of AUSA Life Insurance Company, Inc. at December 31, 1997 and 1996, or the
results of its operations or its cash flows for each of the three years in the
period ended December 31, 1997.

Ernst & Young LLP is a member of Ernst & Young International, Ltd.
<PAGE>

[LOGO]

Also, in our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of AUSA Life Insurance Company,
Inc. at December 31, 1997 and 1996, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1997 in
conformity with accounting practices prescribed or permitted by the Department
of Insurance of the State of New York. Also, in our opinion, the related
financial statement schedules, when considered in relation to the basic
statutory-basis financial statements taken as a whole, present fairly in all
material respects the information set forth therein.

/s/ Ernst & Young LLP

Des Moines, Iowa
February 27, 1998

2
<PAGE>

AUSA Life Insurance Company, Inc.

Balance Sheets Statutory Basis
(Dollars in thousands, except per share data)

<TABLE>
<CAPTION>
December 31
1997 1996
--------------------------------
<S> <C> <C>
ADMITTED ASSETS
Cash and invested assets:
Cash and short-term investments $ 53,508 $ 25,391
Bonds 3,795,509 3,495,667
Stocks:
Preferred - 125
Common, at market (cost: $118 in 1997 and
$13 in 1996) 144 18
Mortgage loans on real estate 495,009 618,633
Real estate acquired in satisfaction of debt, at cost
less accumulated depreciation ($1,816 in 1997 and
$1,087 45,695 58,100
in 1996)

Policy loans 739 755
Other invested assets 22,309 3,393
--------------------------------
Total cash and invested assets 4,412,913 4,202,082

Short-term note receivable from affiliate 8,800 -
Premiums deferred and uncollected 3,247 3,257
Accrued investment income 66,978 62,258
Federal income taxes recoverable - 416
Other assets 7,479 5,177
Separate account assets 5,452,208 4,755,131

-------------------------------
Total admitted assets $9,951,625 $9,028,321
================================
</TABLE>

See accompanying notes.

3
<PAGE>

<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
--------------------------------
<S> <C> <C>
LIABILITIES AND CAPITAL AND SURPLUS
Liabilities:
Aggregate reserves for policies and contracts:
Life $ 71,331 $ 19,716
Annuity 843,141 768,212
Accident and health 9,264 10,180
Policy and contract claim reserves:
Life 4,187 3,826
Accident and health 9,050 11,160
Other policyholders' funds 3,181,405 3,088,016
Remittances and items not allocated 35,235 16,252
Asset valuation reserve 65,058 44,849
Interest maintenance reserve 16,115 5,494
Payable to affiliates 2,185 8,074
Short-term note payable to affiliate -- 600
Deferred income 13,421 18,023
Payable under assumption reinsurance agreement 56,952 67,217
Other liabilities 7,681 10,748
Separate account liabilities 5,430,479 4,721,974
--------------------------------
Total liabilities 9,745,504 8,794,341

Commitments and contingencies

Capital and surplus:
Common stock, $125 par value, 20 shares authorized,
issued and outstanding 2,500 2,500

Paid-in surplus 306,694 306,694
Unassigned surplus (deficit) (103,073) (75,214)
--------------------------------
Total capital and surplus 206,121 233,980
--------------------------------
Total liabilities and capital and surplus $9,951,625 $9,028,321
================================
</TABLE>

See accompanying notes.

4
<PAGE>

AUSA Life Insurance Company, Inc.

Statements of Operations Statutory Basis
(Dollars in thousands)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
--------------------------------------------------
<S> <C> <C> <C>
Revenues:
Premiums and other considerations, net of
reinsurance:
Life $ 60,261 $ 9,344 $ 9,066
Annuity 1,146,805 1,060,655 1,144,423
Accident and health 34,846 47,695 53,346
Net investment income 325,181 323,828 318,004
Amortization of interest maintenance reserve 2,941 1,903 1,931
Commissions and expense allowances on
reinsurance ceded 189 43 40

Other income 15,037 10,739 8,786
--------------------------------------------------
1,585,260 1,454,207 1,535,596
Benefits and expenses:
Benefits paid or provided for:
Life and accident and health benefits 28,023 39,921 40,719
Surrender benefits 1,156,619 852,745 815,882
Other benefits 12,062 9,778 7,804
Increase (decrease) in aggregate reserves for
policies and contracts:
Life 51,615 1,557 1,570
Annuity 74,929 59,090 127,403
Accident and health (916) (671) 775
Other 580 609 609
Increase in liability for premium and other
deposit type funds 92,280 93,893 229,485
--------------------------------------------------
1,415,192 1,056,922 1,224,247
Insurance expenses:
Commissions 78,971 87,861 95,900
General insurance expenses 87,782 79,310 69,933
Taxes, licenses and fees 2,872 2,643 1,638
Net transfers to (from) separate accounts (2,304) 227,802 139,912
Other expenses 43 (19) (37)
--------------------------------------------------
167,364 397,597 307,346
--------------------------------------------------
1,582,556 1,454,519 1,531,593
--------------------------------------------------

Gain (loss) from operations before federal
income taxes and net realized capital gains
(losses) on investments 2,704 (312) 4,003
Federal income tax expense 28 1,305 5,588
--------------------------------------------------
Gain (loss) from operations before net realized
capital gains (losses) on investments 2,676 (1,617) (1,585)
Net realized capital gains (losses) on
investments (net of related federal income
taxes and amounts transferred to interest
maintenance reserve) 827 (12,097) (3,464)
--------------------------------------------------
Net income (loss) $ 3,503 $ (13,714) $ (5,049)
==================================================
</TABLE>

See accompanying notes.

5
<PAGE>

AUSA Life Insurance Company, Inc.

Statements of Changes in Capital and Surplus Statutory Basis
(Dollars in thousands)

<TABLE>
<CAPTION>
UNASSIGNED TOTAL
COMMON PAID-IN SURPLUS CAPITAL AND
STOCK SURPLUS (DEFICIT) SURPLUS
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at January 1, 1995 $2,500 $265,694 $ (43,044) $225,150
Capital contribution - 41,000 41,000
Net loss for 1995 - - (5,049) (5,049)
Net unrealized capital losses - - (501) (501)
Increase in non-admitted assets - - (920) (920)
Increase in asset valuation reserve - - (10,370) (10,370)
Surplus effect of reinsurance - - (70) (70)
Seed money contributed to separate
account, net of redemptions - - (1,000) (1,000)
Increase in liability for reinsurance in
unauthorized companies - - (51) (51)
Increase in surplus in separate account - - 3,121 3,121
-------------------------------------------------------------
Balance at December 31, 1995 2,500 306,694 (57,884) 251,310
Net loss for 1996 - - (13,714) (13,714)
Net unrealized capital losses - - (486) (486)
Decrease in non-admitted assets - - 520 520
Increase in liability for reinsurance in
unauthorized companies - - (42) (42)
Increase in asset valuation reserve - - (5,891) (5,891)
Seed money contributed to separate
account, net of redemptions - - (12,500) (12,500)
Increase in surplus in separate account - - 14,783 14,783
-------------------------------------------------------------
Balance at December 31, 1996 2,500 306,694 (75,214) 233,980
Net gain for 1997 - - 3,503 3,503
Net unrealized capital losses - - (2,629) (2,629)
Increase in non-admitted assets - - (8,505) (8,505)
Decrease in liability for reinsurance in
unauthorized companies - - 30 30
Increase in asset valuation reserve - - (20,209) (20,309)
Seed money withdrawn from separate
account, net of redemptions - - 11,700 11,700
Decrease in surplus in separate account - - (11,749) (11,749)
-------------------------------------------------------------
Balance at December 31, 1997 $2,500 $306,694 $(103,073) $206,121
=============================================================
</TABLE>

See accompanying notes.

6
<PAGE>

AUSA Life Insurance Company, Inc.

Statements of Cash Flows Statutory Basis
(Dollars in thousands)

<TABLE>
<CAPTION>
Year ended December 31
1997 1996 1995
--------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Premiums and other considerations, net of reinsurance $ 1,268,814 $ 1,128,792 $ 1,215,941
Net investment income 323,269 329,948 316,494
Life and accident and health claims (29,800) (42,143) (39,194)
Surrender benefits and other fund withdrawals (1,156,619) (852,745) (815,882)
Other benefits to policyholders (12,036) (9,776) (7,789)
Commissions, other expenses and other taxes (178,648) (187,930) (183,810)
Net transfer (to) from separate account 1,467 (229,556) (139,912)
Federal income taxes (paid) received 388 (526) (6,299)
Other, net (1,919) (14,820) 7,133
--------------------------------------------------------
Net cash provided by operating activities 214,916 121,244 346,682

INVESTING ACTIVITIES
Proceeds from investments sold, matured or repaid:
Bonds and preferred stocks 808,738 703,936 529,363
Common stocks - 5,288 2,957
Mortgage loans on real estate 179,810 165,460 138,243
Real estate 25,104 - 4,953
Policy loans 16 4 -
--------------------------------------------------------
1,013,668 874,688 675,516
Cost of investments acquired:
Bonds and preferred stocks (1,112,481) (1,016,678) (1,018,097)
Common stocks (103) (589) (5,174)
Mortgage loans on real estate (60,722) (42,118) (54,140)
Real estate - (521) -
Policy loans - - (40)
Other (17,761) (2,968) (993)
--------------------------------------------------------
(1,191,067) (1,062,874) (1,078,444)
--------------------------------------------------------
Net cash used in investing activities (177,399) (188,186) (402,928)

FINANCING ACTIVITIES
Issuance (payment) of intercompany notes, net (9,400) (19,200) 14,600
Capital contribution - - 41,000
--------------------------------------------------------
Net cash provided by (used in) financing activities (9,400) (19,200) 55,600
--------------------------------------------------------
Increase (decrease) in cash and short-term investments 28,117 (86,142) (646)

Cash and short-term investments at beginning of year 25,391 111,533 112,179
--------------------------------------------------------
Cash and short-term investments at end of year $ 53,508 $ 25,391 $ 111,533
========================================================
</TABLE>

See accompanying notes.

<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements Statutory Basis
(Dollars in thousands)

December 31, 1997

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

AUSA Life Insurance Company, Inc. ("the Company") is a stock life insurance
company and is a wholly-owned subsidiary of First AUSA Life Insurance Company
("First AUSA") which, in turn, is a wholly-owned subsidiary of AEGON USA
("AEGON"). AEGON is a wholly-owned subsidiary of AEGON nv, a holding company
organized under the laws of The Netherlands. On December 31, 1993, the Company
entered into an assumption reinsurance agreement with Mutual of New York
("MONY") to transfer certain group pension business of MONY to the Company.

In July 1996, the Company completed a merger with International Life Investors
Insurance Company ("ILI"), a wholly-owned subsidiary of Life Investors Insurance
Company of America, another wholly-owned subsidiary of First AUSA, whereby ILI
was merged directly into the Company. The Company received assets of $688,233
and liabilities of $635,189. The difference between assets and liabilities was
transferred directly to capital and surplus. In accordance with National
Association of Insurance Commissioners ("NAIC") statutory accounting principles,
all prior period financial statements presented have been restated as if the
merger took place at the beginning of such periods. Historical book values
carried over from the separate companies to the combined entity.

NATURE OF BUSINESS

The Company primarily sells group fixed and variable annuities and group life
coverages. The Company is licensed in 48 states and the District of Columbia and
is actively in the process of becoming licensed in all 50 states. Sales of the
Company's products are primarily through brokers.

BASIS OF PRESENTATION

The preparation of financial statements of insurance companies requires
management to make estimates and assumptions that affect amounts reported in the
financial statements and accompanying notes. Actual results could differ from
those estimates.

Significant estimates and assumptions are utilized in the calculation of
aggregate policy reserves, policy and contract reserves, guarantee fund
assessment accruals and valuation allowances on investments. It is reasonably
possible that actual experience could differ from the estimates and assumptions
utilized which could have a material impact on the financial statements.

8
<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements Statutory Basis (continued)
(Dollars in thousands)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The accompanying financial statements have been prepared on the basis of
accounting practices prescribed or permitted by the Department of Insurance of
the State of New York, which practices differ in some respects from generally
accepted accounting principles. The more significant of these differences are as
follows: (a) bonds are generally reported at amortized cost rather than
segregating the portfolio into held-to-maturity (reported at amortized cost),
available-for-sale (reported at fair value), and trading (reported at fair
value) classifications; (b) acquisition costs of acquiring new business are
charged to current operations as incurred rather than deferred and amortized
over the life of the policies; (c) policy reserves on traditional life products
are based on statutory mortality rates and interest which may differ from
reserves based on reasonable assumptions of expected mortality, interest, and
withdrawals which include a provision for possible unfavorable deviation from
such assumptions; (d) policy reserves on certain investment products use
discounting methodologies utilizing statutory interest rates rather than full
account values; (e) reinsurance amounts are netted against the corresponding
asset or liability rather than shown as gross amounts on the balance sheet; (f)
deferred income taxes are not provided for the difference between the financial
statement and income tax bases of assets and liabilities; (g) net realized gains
or losses attributed to changes in the level of interest rates in the market are
deferred and amortized over the remaining life of the bond or mortgage loan,
rather than recognized as gains or losses in the statement of operations when
the sale is completed; (h) declines in the estimated realizable value of
investments are provided for through the establishment of a formula-determined
statutory investment reserve (reported as a liability), changes to which are
charged directly to surplus, rather than through recognition in the statement of
operations for declines in value, when such declines are judged to be other than
temporary; (i) certain assets designated as "non-admitted assets" have been
charged to surplus rather than being reported as assets; (j) revenues for
universal life and investment products consist of premiums received rather than
policy charges for the cost of insurance, policy administration charges,
amortization of policy initiation fees and surrender charges assessed; (k)
pension expense is recorded as amounts are paid; (l) adjustments to federal
income taxes of prior years are charged or credited directly to unassigned
surplus, rather than reported as a component of expense in the statement of
operations; and (m) gains or losses on dispositions of business are charged or
credited directly to unassigned surplus rather than being reported in the
statement of operations. The effects of these variances have not been determined
by the Company.

The National Association of Insurance Commissioners (NAIC) currently is in the
process of recodifying statutory accounting practices, the result of which is
expected to constitute the only source of "prescribed" statutory accounting
practices. Accordingly, that project, which is expected to be completed in 1998,
will likely change, to some extent, prescribed statutory accounting practices
and may result in changes to the accounting practices that the Company uses to
prepare its statutory-basis financial statements.

9
<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements Statutory Basis (continued)
(Dollars in thousands)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

CASH AND CASH EQUIVALENTS

For purposes of the statement of cash flows, the Company considers all highly
liquid investments with remaining maturity of one year or less when purchased to
be cash equivalents.

INVESTMENTS

Investments in bonds (except those to which the Securities Valuation Office of
the NAIC has ascribed a value), mortgage loans on real estate and short-term
investments are reported at cost adjusted for amortization of premiums and
accrual of discounts. Amortized costs for bonds and mortgage loans on real
estate that were acquired through the reinsurance agreement, described earlier,
were initially recorded at market value, consistent with the aforementioned
agreement and as prescribed by the Department of Insurance of the State of New
York. Amortization is computed using methods which result in a level yield over
the expected life of the security. The Company reviews its prepayment
assumptions on mortgage and other asset backed securities at regular intervals
and adjusts amortization rates retrospectively when such assumptions are changed
due to experience and/or expected future patterns. Investments in preferred
stocks in good standing are reported at cost. Investments in preferred stocks
not in good standing are reported at the lower of cost or market. Common stocks,
which may include shares of mutual funds (money market and other), are carried
at market. Real estate is reported at cost less allowances for depreciation.
Depreciation is computed principally by the straight-line method. Policy loans
are reported at unpaid principal. Other invested assets consist principally of
investments in various joint ventures and are recorded at equity in underlying
net assets. Other "admitted assets" are valued, principally at cost, as required
or permitted by New York Insurance Laws.

Realized capital gains and losses are determined on the basis of specific
identification and are recorded net of related federal income taxes. The Asset
Valuation Reserve (AVR) is established by the Company to provide for anticipated
losses in the event of default by issuers of certain invested assets. These
amounts are determined using a formula prescribed by the NAIC and are reported
as a liability. The formula for the AVR provides for a corresponding adjustment
for realized gains and losses. Under a formula prescribed by the NAIC, the
Company defers, in the Interest Maintenance Reserve (IMR), the portion of
realized gains and losses on sales of fixed income investments, principally
bonds and mortgage loans, attributable to changes in the general level of
interest rates and amortizes those deferrals over the remaining period to
maturity of the security.

10
<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements Statutory Basis (continued)
(Dollars in thousands)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Interest income is recognized on an accrual basis. The Company does not accrue
income on bonds in default, mortgage loans on real estate in default and/or
foreclosure or which are delinquent more than twelve months, or real estate
where rent is in arrears for more than three months. Further, income is not
accrued when collection is uncertain. At December 31, 1997, 1996 and 1995, the
Company excluded investment income due and accrued of $473, $469 and $216,
respectively, with respect to such practices.

The Company uses interest rate swaps as part of its overall interest rate risk
management strategy for certain life insurance and annuity products. The Company
entered into an interest rate swap contract to modify the interest rate
characteristics of the underlying liabilities. The net interest effect of such
swap transactions is reported as an adjustment of interest income from the
hedged items as incurred.

Deferred income for unrealized gains and losses on the securities valued at
market at the time of the assumption reinsurance agreement (described in Note 4)
are returned to MONY at the time of realization pursuant to the agreement.

AGGREGATE POLICY RESERVES

Life, annuity and accident and health benefit reserves are developed by
actuarial methods and are determined based on published tables using statutorily
specified interest rates and valuation methods that will provide, in the
aggregate, reserves that are greater than or equal to the minimum required by
law.

The aggregate policy reserves for life insurance policies are based principally
upon the 1941, 1958 and 1980 Commissioners' Standard Ordinary Mortality Tables.
The reserves are calculated using interest rates ranging from 2.50 to 6.50
percent and are computed principally on the Net Level Premium Valuation and the
Commissioners' Reserve Valuation Methods. Reserves for universal life policies
are based on account balances adjusted for the Commissioners' Reserve Valuation
Method.

Deferred annuity reserves are calculated according to the Commissioners' Annuity
Reserve Valuation Method including excess interest reserves to cover situations
where the future interest guarantees plus the decrease in surrender charges are
in excess of the maximum valuation rates of interest. Reserves for immediate
annuities and supplementary contracts with life contingencies are equal to the
present value of future payments assuming interest rates ranging from 3.00 to
8.25 percent and mortality rates, where appropriate, from a variety of tables.

Accident and health policy reserves are equal to the greater of the gross
unearned premiums or any required midterminal reserves plus net unearned
premiums and the present value of amounts not yet due on both reported and
unreported claims.

11
<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements Statutory Basis (continued)
(Dollars in thousands)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

POLICY AND CONTRACT CLAIM RESERVES

Claim reserves represent the estimated accrued liability for claims reported to
the Company and claims incurred but not yet reported through the statement date.
These reserves are estimated using either individual case-basis valuations or
statistical analysis techniques. These estimates are subject to the effects of
trends in claim severity and frequency. The estimates are continually reviewed
and adjusted as necessary as experience develops or new information becomes
available.

SEPARATE ACCOUNTS

Assets held in trust for purchases of separate account contracts and the
Company's corresponding obligation to the contract owners are shown separately
in the balance sheets. Income and gains and losses with respect to these assets
accrue to the benefit of the policyholders and, accordingly, the operations of
the separate accounts are not included in the accompanying financial statements.

RECLASSIFICATIONS

Certain reclassifications have been made to the 1996 and 1995 financial
statements to conform to the 1997 presentation.

2. FAIR VALUES OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards (SFAS) No. 107, Disclosures about
Fair Value of Financial Instruments, requires disclosure of fair value
information about financial instruments, whether or not recognized in the
statutory-basis balance sheet, for which it is practicable to estimate that
value. SFAS No. 119, Disclosures About Derivative Financial Instruments and Fair
Value of Financial Instruments, requires additional disclosures about
derivatives. In cases where quoted market prices are not available, fair values
are based on estimates using present value or other valuation techniques. Those
techniques are significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. In that regard, the derived
fair value estimates cannot be substantiated by comparisons to independent
markets and, in many cases, could not be realized in immediate settlement of the
instrument. SFAS No. 107 and No. 119 exclude certain financial instruments and
all nonfinancial instruments from their disclosure requirements and allow
companies to forego the disclosures when those estimates can only be made at
excessive cost. Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Company.

12
<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements Statutory Basis (continued)
(Dollars in thousands)

2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)

The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:

Cash and short-term investments: The carrying amounts reported in the
statutory-basis balance sheet for these instruments approximate their
fair values.

Investment securities: Fair values for fixed maturity securities
(including redeemable preferred stocks) are based on quoted market
prices, where available. For fixed maturity securities not actively
traded, fair values are estimated using values obtained from independent
pricing services or, in the case of private placements, are estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality, and maturity of the investments.
The fair values for equity securities are based on quoted market prices.

Mortgage loans and policy loans: The fair values for mortgage loans are
estimated utilizing discounted cash flow analyses, using interest rates
reflective of current market conditions and the risk characteristics of
the loans. The fair value of policy loans is assumed to equal its
carrying value.

Investment contracts: Fair values for the Company's liabilities under
investment-type insurance contracts are estimated using discounted cash
flow calculations, based on interest rates currently being offered for
similar contracts with maturities consistent with those remaining for the
contracts being valued.

Interest rate swap: Estimated fair value of the interest rate swaps are
based upon the pricing differential for similar swap agreements.

Fair values for the Company's insurance contracts other than investment
contracts are not required to be disclosed. However, the fair values of
liabilities under all insurance contracts are taken into consideration in the
Company's overall management of interest rate risk, which minimizes exposure to
changing interest rates through the matching of investment maturities with
amounts due under insurance contracts.

13
<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)

The following sets forth a comparison of the fair values and carrying values of
the Company's financial instruments subject to the provisions of Statement of
Financial Accounting Standards No. 107 and No. 119:

<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
------------------------------ -------------------------------
CARRYING CARRYING
VALUE FAIR VALUE VALUE FAIR VALUE
------------------------------ -------------------------------
<S> <C> <C> <C> <C>
ADMITTED ASSETS
Bonds $3,795,509 $3,880,098 $3,495,667 $3,530,250
Preferred stocks - - 125 120
Common stock 144 144 18 18
Mortgage loans on real estate 495,009 504,947 618,633 619,479
Interest rate swap - 391 - -

Policy loans 739 739 755 755

Cash and short-term investments 53,508 53,508 25,391 25,391

Separate account assets 5,452,208 5,462,501 4,755,131 4,754,781

LIABILITIES
Investment contract liabilities 4,024,004 3,947,049 3,855,787 3,731,340
Separate account annuities 5,417,036 5,400,010 4,707,568 4,677,289
</TABLE>

3. INVESTMENTS

The carrying value and estimated market value of investments in debt securities
were as follows:

<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED FAIR
CARRYING VALUE GAINS LOSSES VALUE
----------------------------------------------------------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
Bonds:
United States Government and agencies $ 93,649 $ 499 $ 252 $ 93,896
State, municipal and other government 55,336 1,413 1,761 54,988
Public utilities 251,071 4,943 892 255,122
Industrial and miscellaneous 2,180,885 57,783 5,344 2,233,324
Mortgage-backed securities 1,214,568 31,185 2,985 1,242,768
----------------------------------------------------------------
$3,795,509 $95,823 $11,234 $3,880,098
================================================================
</TABLE>

<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements Statutory Basis (continued)
(Dollars in thousands)

3. INVESTMENTS (CONTINUED)

<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
CARRYING UNREALIZED UNREALIZED FAIR
VALUE GAINS LOSSES VALUE
----------------------------------------------------------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1996
Bonds:
United States Government and agencies $ 122,355 $ 1,170 $ 1,086 $ 122,439
State, municipal and other government 25,027 519 36 25,510
Public utilities 229,732 2,086 2,977 228,841
Industrial and miscellaneous 2,031,086 33,621 14,895 2,049,812
Mortgage-backed securities 1,087,467 22,579 6,398 1,103,648
----------------------------------------------------------------
3,495,667 59,975 25,392 3,530,250
Preferred stocks 125 5 10 120
----------------------------------------------------------------
$3,495,792 $59,980 $25,402 $3,530,370
================================================================
</TABLE>

The carrying value and estimated market value of bonds at December 31, 1997, by
contractual maturity, are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
CARRYING ESTIMATED
VALUE FAIR VALUE
--------------------------------
<S> <C> <C>
Due in one year or less $ 136,322 $ 136,393
Due after one year through five years 1,371,927 1,398,781
Due after five years through ten years 915,324 938,972
Due after ten years 157,368 163,184
--------------------------------
2,580,941 2,637,330
Mortgage-backed securities 1,214,568 1,242,768
--------------------------------
$3,795,509 $3,880,098
================================
</TABLE>

15
<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

3. INVESTMENTS (CONTINUED)

A detail of net investment income is presented below:

<TABLE>
<CAPTION>
DECEMBER 31
1997 1996 1995
-------------------------------------------------
<S> <C> <C> <C>
Interest on bonds and notes $269,659 $251,923 $231,206
Mortgage loans 57,659 83,511 98,653
Real estate 13,976 7,225 2,400
Dividends on equity investments 9 25 137
Interest on policy loans 39 34 40
Derivative instruments 100 - -
Other investment gain (loss) 1,340 (5,511) (3,926)
-------------------------------------------------
Gross investment income 342,782 337,207 328,510

Investment expenses 17,601 13,379 10,506
-------------------------------------------------
Net investment income $325,181 $323,828 $318,004
=================================================
</TABLE>

Proceeds from sales and maturities of debt securities and related gross realized
gains and losses were as follows:

<TABLE>
<CAPTION>
DECEMBER 31
1997 1996 1995
--------------------------------------------------
<S> <C> <C> <C>
Proceeds $808,738 $703,936 $529,363
==================================================

Gross realized gains $ 16,514 $ 9,527 $ 8,541
Gross realized losses (11,493) (11,595) (15,255)
--------------------------------------------------
Net realized gains (losses) $ 5,021 $ (2,068) $ (6,714)
==================================================
</TABLE>

At December 31, 1997, investments with an aggregate carrying value of $2,350
were on deposit with regulatory authorities or were restrictively held in bank
custodial accounts for the benefit of such regulatory authorities as required by
statute.

16
<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

3. INVESTMENTS (CONTINUED)

Realized investment gains (losses) and changes in unrealized gains (losses) for
investments are summarized below:

<TABLE>
<CAPTION>
REALIZED
-----------------------------------------------
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------------
<S> <C> <C> <C>
Debt securities $ 5,021 $ (2,068) $(6,714)
Common stock - 244 -
Preferred stock (7) (44) -
Short-term investments (6) (115) (24)
Mortgage loans on real estate 287 (12,415) (3,650)
Real estate 4,059 - (628)
Other invested assets 5,035 6,872 11,109
-----------------------------------------------
14,389 (7,526) 93

Tax effect - (87) 247
Transfer to interest maintenance reserve (13,562) (4,484) (3,804)
-----------------------------------------------
Total realized gains (losses) $ 827 $(12,097) $(3,464)
===============================================
</TABLE>

<TABLE>
<CAPTION>
CHANGE IN UNREALIZED
-------------------------------------------------
YEAR ENDED DECEMBER 31
1997 1996 1995
-------------------------------------------------
<S> <C> <C> <C>
Debt securities $50,011 $(80,600) $265,890
Equity securities 21 (190) 74
-------------------------------------------------
Change in unrealized appreciation $50,032 $(80,790) $265,964
=================================================
</TABLE>

Gross unrealized gains and gross unrealized losses on equity securities at
December 31, 1997, 1996 and 1995 were as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
--------------------------------------------------
<S> <C> <C> <C>
Unrealized gains $ 38 $ 16 $ 206
Unrealized losses (12) (11) (11)
--------------------------------------------------
Net unrealized gains $ 26 $ 5 $ 195
==================================================
</TABLE>

17
<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

3. INVESTMENTS (CONTINUED)

During 1997, the Company issued mortgage loans with interest rates ranging from
8.10% to 8.72%. The maximum percentage of any one loan to the value of the
underlying real estate at origination was 85%. No mortgage loans were non-income
producing for the previous twelve months and, accordingly, no accrued interest
related to these mortgage loans was excluded from investment income. During
1997, the Company refinanced the mortgage loans of one property with an
aggregate carrying value of $24,888 to reduce the interest rates, as a result of
the current interest rate environment. The Company requires all mortgage loans
to carry fire insurance equal to the value of the underlying property.

During 1997, 1996 and 1995, there were $4,427, $28,929 and $14,264,
respectively, in foreclosed mortgage loans that were transferred to real estate.
At December 31, 1997 and 1996, the Company held a mortgage loan loss reserve in
the asset valuation reserve of $20,191 and $8,368, respectively. The mortgage
loan portfolio is diversified by geographic region and specific collateral
property type as follows:

<TABLE>
<CAPTION>
GEOGRAPHIC DISTRIBUTION Property Type Distribution
- -------------------------------------------------- -------------------------------------------
DECEMBER 31 DECEMBER 31
1997 1996 1997 1996
-------------------- -------------------
<S> <C> <C> <C> <C> <C>
Pacific 20% 2% Office 30% 42%
South Atlantic 20 37 Apartment 23 10
Mid-Atlantic 16 5 Retail 19 30
E. North Central 16 21 Other 15 17
Mountain 15 15 Industrial 13 1
New England 7 10
W. North Central 2 5
W. South Central 2 5
E. South Central 2 -
</TABLE>

At December 31, 1997, the Company had the following investments, excluding U. S.
Government guaranteed or insured issues, which individually represented more
than ten percent of capital and surplus and the asset valuation reserve:

<TABLE>
<CAPTION>
CARRYING
DESCRIPTION OF SECURITY VALUE
- -------------------------------------------------------- ---------------
<S> <C>
Bonds:
Chase Manhattan Corp. $37,953
PSEG Capital 27,490
</TABLE>

18
<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

3. INVESTMENTS (CONTINUED)

The Company utilizes an interest rate swap agreement as part of its efforts to
hedge and manage fluctuations in the market value of its investment portfolio
attributable to changes in general interest rate levels and to manage duration
mismatch of assets and liabilities. The contract or notional amounts of those
instruments reflect the extent of involvement in the various types of financial
instruments.

The Company's exposure to credit risk is the risk of loss from a counterparty
failing to perform according to the terms of the contract. That exposure
includes settlement risk (i.e., the risk that the counterparty defaults after
the Company has delivered funds or securities under terms of the contract) that
would result in an accounting loss and replacement cost risk (i.e., the cost to
replace the contract at current market rates should the counterparty default
prior to settlement date). Credit loss exposure resulting from nonperformance by
a counterparty for commitments to extend credit is represented by the
contractual amounts of the instruments.

At December 31, 1997 and 1996, the Company's outstanding financial instruments
with on and off-balance sheet risks, shown in notional amounts, are summarized
as follows:

<TABLE>
<CAPTION>
NOTIONAL AMOUNT
1997 1996
----------------------
<S> <C> <C>
Derivative securities:
Interest rate swaps:
Receive fixed - pay floating $50,800 $-
</TABLE>

4. REINSURANCE

The Company reinsures portions of risk on certain insurance policies which
exceed its established limits, thereby providing a greater diversification of
risk and minimizing exposure on larger risks. The Company remains contingently
liable with respect to any insurance ceded, and this would become an actual
liability in the event that the assuming insurance company became unable to meet
its obligation under the reinsurance treaty.

Premiums earned reflect the following reinsurance assumed and ceded amounts for
the year ended December 31:

<TABLE>
<CAPTION>
1997 1996 1995
---------------------------------------------
<S> <C> <C> <C>
Direct premiums $1,239,553 $1,135,315 $1,207,720
Reinsurance assumed 6,905 9,962 37,423
Reinsurance ceded (4,546) (27,583) (38,308)
---------------------------------------------
Net premiums earned $1,241,912 $1,117,694 $1,206,835
=============================================
</TABLE>

19
<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

4. REINSURANCE (CONTINUED)

The Company received reinsurance recoveries in the amounts of $1,633, $953 and
$533 during 1997, 1996 and 1995, respectively.

The aggregate reserves for policies and contracts were reduced for reserve
credits for reinsurance ceded at December 31, 1997 and 1996 of $153,178 and
$157,396, respectively.

On December 31, 1993, the Company and MONY entered into an assumption
reinsurance agreement whereby all of the general account liabilities were
novated to the Company from MONY as state approvals were received.

In accordance with the agreement, MONY will receive payments relating to the
performance of the assets and liabilities that exist at the date of closing for
a period of nine years. These payments will be reduced for certain
administrative expenses as defined in the agreement. The Company will recognize
operating gains and losses on renewal premiums received after December 31, 1993
of the business in-force at December 31, 1993, and on all new business written
after that date. At the end of nine years, the Company will purchase from MONY
the remaining transferred business inforce based upon a formula described in the
agreement. At December 31, 1997 and 1996, the Company owed MONY $56,952 and
$67,217, respectively, which represents the amount earned by MONY under the gain
sharing calculation and certain fees for investment management services for the
respective years.

In connection with the transaction, MONY purchased $150,000 and $50,000 in
Series A and Series B notes, respectively, of AEGON. The proceeds were used to
enhance the surplus of the Company. Both the Series A and Series B notes bear a
market rate of interest and mature in nine years from the date of closing.

AEGON provides general and administrative services for the transferred business
under a related agreement with MONY. The agreement specifies prescribed rates
for expenses to administer the business up to certain levels. In addition, AEGON
also provides investment management services on the assets underlying the new
business written by the Company while MONY continues to provide investment
management services for assets supporting the remaining policy liabilities which
were transferred at December 31, 1993.

On October 1, 1995, the Company entered into a reinsurance agreement with a non-
affiliate. As a result, the Company received $4,242 of assets, including $38 of
cash, and $4,312 of liabilities. The difference between the assets and the
liabilities of $70 was charged directly to unassigned surplus.

20
<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

5. INCOME TAXES

The Company files a separate federal income tax return.

Federal income tax expense differs from the amount computed by applying the
statutory federal income tax rate to loss from operations before taxes and
realized capital losses for the following reasons:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
------------------------------------------------
<S> <C> <C> <C>
Computed tax expense (benefit) at federal statutory
rate (35%) $ 946 $ (109) $1,402
Tax reserve adjustment (144) (211) 755
Deferred acquisition cost tax basis 2,349 465 636
Carryforward (utilization) of operating loss (1,275) 2,611 3,351
Excess tax depreciation (16) (13)
Dividend received deduction (1,566) (4)
Prior year (over)/under accrual 28 114 (67)
IMR amortization (1,029) (666) (676)
Other items net 735 (882) 187
------------------------------------------------
Federal income tax expense $ 28 $1,305 $5,588
================================================
</TABLE>

Federal income tax expense (benefit) differs from the amount computed by
applying the statutory federal income tax rate to realized gains (losses) due to
the agreement between MONY and the Company, as discussed in Note 4 to the
financial statements. In accordance with this agreement, these gains and losses
are included in the net payments MONY will receive relating to the performance
of the assets that existed at the date of closing. Accordingly, income taxes
relating to gains and losses on such assets are not provided for on the income
tax return filed by the Company.

Prior to 1984, as provided for under the Life Insurance Company Tax Act of 1959,
a portion of statutory income was not subject to current taxation but was
accumulated for income tax purposes in a memorandum account referred to as the
policyholders' surplus account. No federal income taxes have been provided for
in the financial statements on income deferred in the policyholders' surplus
account ($797 at December 31, 1997). To the extent dividends are paid from the
amount accumulated in the policyholders' surplus account, net earnings would be
reduced by the amount of tax required to be paid. Should the entire amount in
the policyholders' surplus account become taxable, the tax thereon computed at
current rates would amount to approximately $279.

At December 31, 1997 the Company had net operating loss carryforwards of
approximately $19,155 which expire through 2011.

An examination by the Internal Revenue Service is underway for years 1993 -
1995.

21
<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

6. POLICY AND CONTRACT ATTRIBUTES

A portion of the Company's policy reserves and other policyholders' funds relate
to liabilities established on a variety of the Company's products that are not
subject to significant mortality or morbidity risk; however, there may be
certain restrictions placed upon the amount of funds that can be withdrawn
without penalty. The amount of reserves on these products, by withdrawal
characteristics, are summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
-------------------------------------------------------------
PERCENT OF PERCENT OF
AMOUNT TOTAL AMOUNT TOTAL
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Subject to discretionary withdrawal with market
value adjustment $ 910,528 9% $ 834,176 10%

Subject to discretionary withdrawal at book
value less surrender charge 1,032,460 11 1,583,989 18

Subject to discretionary withdrawal at market
value 2,772,795 29 2,254,074 26

Subject to discretionary withdrawal at book
value (minimal or no charges or adjustments) 2,565,002 27 1,913,542 22

Not subject to discretionary withdrawal
provision 2,314,542 24 2,136,222 24
------------------------------------------------------------
9,595,327 100% 8,722,003 100%
====== =========
Less reinsurance ceded 152,726 157,039
---------------- ------------
Total policy reserves on annuities and deposit
fund liabilities $9,442,601 $8,564,964
================ ============
</TABLE>

Separate and variable account assets held by the Company represent contracts
where the benefit is determined by the performance of the investments held in
the separate account. Information regarding the separate accounts of the Company
as of and for the years ended December 31, 1997, 1996 and 1995 is as follows:

<TABLE>
<CAPTION>
GUARANTEED NON-GUARANTEED
SEPARATE SEPARATE
ACCOUNT ACCOUNT TOTAL
------------------------------------------------
<S> <C> <C> <C>
Premiums, deposits and other
considerations for the year ended
December 31, 1997 $ 147,638 $ 596,581 $ 744,219
================================================

Reserves for separate accounts with
assets as of December 31, 1997 at:
Fair value $2,204,931 $2,589,401 $4,794,332
Amortized cost 622,703 - 622,703
------------------------------------------------
Total $2,827,634 $2,589,401 $5,417,035
================================================
</TABLE>

22
<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

6. POLICY AND CONTRACT ATTRIBUTES (CONTINUED)

<TABLE>
<CAPTION>
GUARANTEED NON-GUARANTEED
SEPARATE SEPARATE
ACCOUNT ACCOUNT TOTAL
----------------------------------------------------
<S> <C> <C> <C>
Premiums, deposits and other
considerations for the year ended
December 31, 1996 $ - $ 716,524 $ 716,524
====================================================

Reserves for separate accounts with
assets as of December 31, 1996 at:
Fair value $ 2,022,843 $2,071,160 $4,094,003
Amortized cost 613,565 - 613,565
----------------------------------------------------
Total $ 2,636,408 $2,071,160 $4,707,568
====================================================

Premiums, deposits and other
considerations for the year ended
December 31, 1995 $ - $ 536,128 $ 536,128
====================================================

Reserves for separate accounts with
assets as of December 31, 1995 at:
Fair value $ 2,147,500 $1,491,225 $3,638,725
Amortized cost 599,254 - 599,254
----------------------------------------------------
Total $ 2,746,754 $1,491,225 $4,237,979
====================================================
</TABLE>

There may be certain restrictions placed upon the amount of funds that can be
withdrawn without penalty. The amount of separate account liabilities on these
products, by withdrawal characteristics, are summarized as follows:

<TABLE>
<CAPTION>
GUARANTEED NON-GUARANTEED
SEPARATE SEPARATE
ACCOUNT ACCOUNT TOTAL
----------------------------------------------------
<S> <C> <C> <C>
DECEMBER 31, 1997
Subject to discretionary withdrawal
with market value adjustment $ 358,061 $ - $ 358,061

Subject to discretionary withdrawal at
book value less surrender charge 264,642 - 264,642

Subject to discretionary withdrawal at
market value 180,802 2,589,401 2,770,203

Not subject to discretionary withdrawal 2,024,129 - 2,024,129
----------------------------------------------------
$2,827,634 $2,589,401 $5,417,035
====================================================
</TABLE>

23
<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

6. POLICY AND CONTRACT ATTRIBUTES (CONTINUED)

<TABLE>
<CAPTION>
GUARANTEED NON-GUARANTEED
SEPARATE SEPARATE
ACCOUNT ACCOUNT TOTAL
-------------------------------------------------
<S> <C> <C> <C>
DECEMBER 31, 1996
Subject to discretionary withdrawal
with market value adjustment $ 269,991 $ -- $ 269,991
Subject to discretionary withdrawal at
book value less surrender charge 279,399 -- 279,399
Subject to discretionary withdrawal at
market value 181,158 2,071,160 2,252,318
Not subject to discretionary withdrawal 1,905,860 -- 1,905,860
-------------------------------------------------
$2,636,408 $2,071,160 $4,707,568
=================================================
</TABLE>

A reconciliation of the amounts transferred to and from the separate accounts is
presented below:

<TABLE>
<CAPTION>
1997 1996 1995
---------------------------------------
<S> <C> <C> <C>
Transfers as reported in the summary of operations of
the separate accounts statement:
Transfers to separate accounts $744,188 $716,525 $536,128
Transfers from separate accounts 760,248 502,244 404,120
---------------------------------------
Net transfers to (from) separate accounts (16,060) 214,281 132,008

Reconciling adjustments - HUB level fees not paid to
AUSA general account 13,756 13,520 7,904
---------------------------------------
Transfers as reported in the summary of operations of
the life, accident and health annual statement $ (2,304) $227,802 $139,912
=======================================
</TABLE>

Reserves on the Company's traditional life products are computed using mean
reserving methodologies. These methodologies result in the establishment of
assets for the amount of the net valuation premiums that are anticipated to be
received between the policy's paid-through date to the policy's next anniversary
date. At December 31, 1997 and 1996, these assets (which are reported as
premiums deferred and uncollected) and the amounts of the related gross premiums
and loadings, are as follows:

24
<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements Statutory Basis (continued)
(Dollars in thousands)

6. POLICY AND CONTRACT ATTRIBUTES (CONTINUED)

<TABLE>
<CAPTION>
GROSS LOADING NET
-------------------------------------
<S> <C> <C> <C>
DECEMBER 31, 1997
Ordinary direct first year business $ 29 $21 $ 8
Ordinary direct renewal business 2,976 49 2,927
Group life direct business 125 19 106
Credit life 41 -- 41
Reinsurance ceded (14) -- (14)
-------------------------------------
3,157 89 3,068
Accident and health:
Direct 230 -- 230
Reinsurance ceded (51) -- (51)
-------------------------------------
Total accident and health 179 -- 179
-------------------------------------
$3,336 $89 $3,247
=====================================

DECEMBER 31, 1996
Ordinary direct first year business $ 83 $(1) $ 84
Ordinary direct renewal business 3,078 25 3,053
Group life direct business 135 22 113
Credit life 5 -- 5
Reinsurance ceded (163) -- (163)
-------------------------------------
3,138 46 3,092
Accident and health:
Direct 165 -- 165
Reinsurance ceded -- -- --
-------------------------------------
Total accident and health 165 -- 165
-------------------------------------
$3,303 $46 $3,257
=====================================
</TABLE>

At December 31, 1997 and 1996, the Company had insurance in force aggregating
$597,855 and $615,025, respectively, in which the gross premiums are less than
the net premiums required by the valuation standards established by the
Department of Insurance of the State of New York. The Company established policy
reserves of $1,476 and $1,520 to cover these deficiencies at December 31, 1997
and 1996, respectively.

7. DIVIDEND RESTRICTIONS

Generally, an insurance company's ability to pay dividends is limited to the
amount that their net assets, as determined in accordance with statutory
accounting practices, exceed minimum statutory capital requirements. However,
payment of such amounts as dividends may be subject to approval by regulatory
authorities. The Company is not entitled to pay out any dividends in 1998
without prior approval.

25
<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

8. RETIREMENT AND COMPENSATION PLANS

The Company's employees participate in a qualified benefit pension plan
sponsored by AEGON. The Company has no legal obligation for the plan. The
Company recognizes pension expense equal to its allocation from AEGON. The
pension expense is allocated among the participating companies based on the FASB
87 expense as a percent of salaries. The benefits are based on years of service
and the employee's compensation during the highest five consecutive years of
employment. The Company was allocated $0, $13 and $14 of pension expense for the
years ended December 31, 1997, 1996 and 1995, respectively. The plan is subject
to the reporting and disclosure requirements of the Employee Retirement Income
Security Act of 1974.

The Company's employees also participate in a contributory defined contribution
plan sponsored by AEGON which is qualified under Section 401(k) of the Internal
Revenue Service Code. Employees of the Company who customarily work at least
1,000 hours during each calendar year and meet the other eligibility
requirements, are participants of the plan. Participants may elect to contribute
up to fifteen percent of their salary to the plan. The Company will match an
amount up to three percent of the participant's salary. Participants may direct
all of their contributions and plan balances to be invested in a variety of
investment options. The plan is subject to the reporting and disclosure
requirements of the Employee Retirement Income Security Act of 1974. The Company
was allocated $12, $21 and $8 of expense for the years ended December 31, 1997,
1996 and 1995, respectively.

AEGON sponsors supplemental retirement plans to provide the Company's senior
management with benefits in excess of normal pension benefits. The plans are
noncontributory and benefits are based on years of service and the employee's
compensation level. The plans are unfunded and nonqualified under the Internal
Revenue Service Code. In addition, AEGON has established incentive deferred
compensation plans for certain key employees of the Company. AEGON also sponsors
an employee stock option plan for individuals employed at least three years and
a stock purchase plan for its producers, with the participating affiliated
companies establishing their own eligibility criteria, producer contribution
limits and company matching formula. These plans have been accrued or funded as
deemed appropriate by management of AEGON and the Company.

In addition to pension benefits, the Company participates in plans sponsored by
AEGON that provide postretirement medical, dental and life insurance benefits to
employees meeting certain eligibility requirements. Portions of the medical and
dental plans are contributory. The expenses of the postretirement plans
calculated on the pay-as-you-go basis are charged to affiliates in accordance
with an intercompany cost sharing arrangement. The Company expensed $2 and $2
for the years ended December 31, 1996 and 1995, respectively. No expense related
to these plans was recorded for 1997.

26
<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

9. RELATED PARTY TRANSACTIONS

In accordance with an agreement between AEGON and the Company, AEGON will ensure
the maintenance of certain minimum tangible net worth, operating leverage and
liquidity levels of the Company, as defined in the agreement, through the
contribution of additional capital by the Company's parent as needed.

The Company shares certain officers, employees and general expenses with
affiliated companies.

The Company receives data processing, investment advisory and management,
marketing and administration services from certain affiliates. During 1997, 1996
and 1995, the Company paid $3,630, $3,539 and $3,961, respectively, for these
services, which approximates their costs to the affiliates.

Payable to affiliates and intercompany borrowings bear interest at the thirty-
day commercial paper rate of 5.60% at December 31, 1997. During 1997, 1996 and
1995, the Company paid net interest of $142, $29 and $289, respectively, to
affiliates.

10. COMMITMENTS AND CONTINGENCIES

The Company is a party to legal proceedings incidental to its business. Although
such litigation sometimes includes substantial demands for compensatory and
punitive damages, in addition to contract liability, it is management's opinion,
after consultation with counsel and a review of available facts, that damages
arising from such demands will not be material to the Company's financial
position.

The Company is subject to insurance guaranty laws in the states in which it
writes business. These laws provide for assessments against insurance companies
for the benefit of policyholders and claimants in the event of insolvency of
other insurance companies. In accordance with the purchase agreement,
assessments related to periods prior to the purchase of the Company will be paid
by Dreyfus. Assessments attributable to business reinsured from MONY for
premiums received prior to the date of the transaction will be paid by MONY. The
Company will be responsible for assessments, if any, attributable to premium
income after the date of purchase. Assessments are charged to operations when
received by the Company except where right of offset against other taxes paid is
allowed by law; amounts available for future offsets are recorded as an asset on
the Company's balance sheet. Potential future obligations for unknown
insolvencies are not determinable by the Company. The future obligation has been
based on the most recent information available from the National Organization of
Life and Health Insurance Guaranty Association. The guaranty fund expense was
$572, $167 and $(207) for the years ended December 31, 1997, 1996 and 1995,
respectively.

27
<PAGE>

AUSA Life Insurance Company, Inc.

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

11. YEAR 2000 (UNAUDITED)

AEGON has adopted and has in place a Year 2000 Assessment and Planning Project
(the "Project") to review and analyze its information technology and systems to
determine if they are Year 2000 compatible. The Company has begun to convert or
modify, where necessary, critical data processing systems. It is contemplated
that the plan will be substantially completed by early 1999. The Company does
not expect this project to have a significant effect on operations. However, to
mitigate the effect of outside influences upon the success of the project, the
Company has undertaken communications with its significant customers, suppliers
and other third parties to determine their Year 2000 compatibility and
readiness. Management believes that the issues associated with the Year 2000
will be resolved with no material financial impact on the Company.

Since the Year 2000 computer problem, and its resolution is complex and
multifaceted, the success of a response plan cannot be conclusively known until
the Year 2000 is reached (or an earlier date to the extent that systems or
equipment addresses Year 2000 date data prior to the Year 2000). Even with
appropriate and diligent pursuit of a well-conceived Project, including testing
procedures, there is no certainty that any company will achieve complete
success. Notwithstanding the efforts or results of the Company, its ability to
function unaffected to and through the Year 2000 may be adversely affected by
actions (or failure to act) of third parties beyond its knowledge or control.

28
<PAGE>

AUSA Life Insurance Company, Inc.

Summary of Investments Other Than
Investments in Related Parties
(Dollars in thousands)

December 31, 1997

SCHEDULE I

<TABLE>
<CAPTION>
AMOUNT AT WHICH
MARKET SHOWN IN THE
TYPE OF INVESTMENT COST (1) VALUE BALANCE SHEET
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FIXED MATURITIES
Bonds:
United States Government and
government agencies and authorities $ 578,548 $ 591,837 $ 578,548
States, municipalities and political
subdivisions 69,321 71,465 69,321
Foreign governments 42,195 40,618 42,195
Public utilities 251,071 255,123 251,071
All other corporate bonds 2,854,374 2,921,055 2,854,374
----------------------------------------------------
Total fixed maturities 3,795,509 3,880,098 3,795,509

EQUITY SECURITIES
Common stocks - industrial,
miscellaneous and all other 118 144 144
----------------------------------------------------
Total equity securities 118 144 144

Mortgage loans on real estate 495,009 495,009
Real estate acquired in satisfaction of
debt 45,695 45,695
Policy loans 739 739
Cash and short-term investments 53,508 53,508
Other long-term investments 22,309 22,309
---------- ----------
Total investments $4,412,887 $4,412,913
========== ==========
</TABLE>

(1) Original cost of equity securities and, as to fixed maturities, original
cost reduced by repayments and adjusted for amortization of premiums or
accrual of discounts.

29
<PAGE>

AUSA Life Insurance Company, Inc.

Supplementary Insurance Information
(Dollars in thousands)

SCHEDULE III

<TABLE>
<CAPTION>
FUTURE POLICY POLICY AND
BENEFITS AND UNEARNED CONTRACT
EXPENSES PREMIUMS LIABILITIES
----------------------------------------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
Individual life $ 71,117 $ -- $ 4,187
Individual health 6,607 2,657 9,050
Group life and health 214 -- --
Annuity 843,141 -- --
----------------------------------------------
$921,079 $2,657 $13,237
==============================================

YEAR ENDED DECEMBER 31, 1996
Individual life $ 19,493 $ -- $ 3,826
Individual health 7,687 2,493 11,160
Group life and health 223 -- --
Annuity 768,212 -- --
----------------------------------------------
$795,615 $2,493 $14,986
==============================================

YEAR ENDED DECEMBER 31, 1995
Individual life $ 17,935 $ -- $ 3,716
Individual health 8,009 2,842 13,515
Group life and health 224 -- --
Annuity 709,122 -- --
----------------------------------------------
$735,290 $2,842 $17,231
==============================================
</TABLE>

30
<PAGE>

<TABLE>
<CAPTION>
NET BENEFITS, CLAIMS OTHER
PREMIUM INVESTMENT LOSSES AND OPERATING PREMIUMS
REVENUE INCOME* SETTLEMENT EXPENSES EXPENSES* WRITTEN
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 58,696 $ 3,949 $ 56,689 $ 3,393 -
27,836 1,130 15,615 6,914 $26,560
8,575 265 7,080 1,544 7,977
1,146,805 319,837 1,335,808 155,513 -
- ----------------------------------------------------------------
$ 1,241,912 $325,181 $1,415,192 $167,364
================================================================

$ 8,468 $ 2,040 $ 9,087 $ 734 -
40,479 1,734 25,674 12,534 $40,098
8,092 372 6,056 3,044 10,683
1,060,655 319,682 1,016,105 381,285 -
- ----------------------------------------------------------------
$ 1,117,694 $323,828 $1,056,922 $397,597
================================================================

$ 8,388 $ 1,634 $ 8,062 $ 770 -
46,975 1,438 29,657 15,204 $46,558
7,049 306 5,293 970 6,074
1,144,423 314,626 1,181,235 290,402
- ----------------------------------------------------------------
$ 1,206,835 $318,004 $1,224,247 $307,346
================================================================
</TABLE>

* Allocations of net investment income and other operating expenses are based on
a number of assumptions and estimates, and the results would change if
different methods were applied.

31
<PAGE>

AUSA Life Insurance Company, Inc.

Reinsurance
(Dollars in thousands)

SCHEDULE IV

<TABLE>
<CAPTION>
ASSUMED PERCENTAGE
CEDED TO FROM OF AMOUNT
GROSS OTHER OTHER NET ASSUMED
AMOUNT COMPANIES COMPANIES AMOUNT TO NET
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER
31, 1997

Life insurance in force $1,559,108 $37,433 $216,838 $1,738,513 12%
============================================================================

Premiums:
Individual life $ 57,604 $ 266 $ 1,358 $ 58,696 2%
Individual health 27,044 4 796 27,836 3
Group life and health 9,103 537 9 8,575 -
Annuity 1,145,802 3,739 4,742 1,146,805 -
----------------------------------------------------------------------------
$1,239,553 $ 4,546 $ 6,905 $1,241,912 1%
============================================================================

YEAR ENDED DECEMBER
31, 1996
Life insurance in force $1,238,554 $68,804 $241,117 $1,410,867 17%
============================================================================

Premiums:
Individual life $ 7,652 $ 560 $ 1,376 $ 8,468 16%
Individual health 39,593 4 890 40,479 2
Group life and health 8,085 - 7 8,092 -
Annuity 1,079,985 27,019 7,689 1,060,655 1
----------------------------------------------------------------------------
$1,135,315 $27,583 $ 9,962 $1,117,694 1%
============================================================================

YEAR ENDED DECEMBER
31, 1995
Life insurance in force $1,497,961 $34,206 $266,127 $1,729,882 15%
============================================================================

Premiums:
Individual life $ 7,348 $ 359 $ 1,399 $ 8,388 17%
Individual health 46,609 5 371 46,975 1
Group life and health 7,043 - 6 7,049 -
Annuity 1,146,720 37,944 35,647 1,144,423 3
----------------------------------------------------------------------------
$1,207,720 $38,308 $ 37,423 $1,206,835 3%
============================================================================
</TABLE>

32
<PAGE>

AUSA Endeavor Variable Annuity Account
The Endeavor Variable Annuity
Balance Sheet
December 31, 1997

<TABLE>
<CAPTION>
T. Rowe Dreyfus
Endeavor Endeavor Price Endeavor Small
Money Asset Int'l. Value Cap
Market Allocation Stock Equity Value
Total Subaccount Subaccount Subaccount Subaccount Subaccount
----- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Assets

Cash $ 11 11 - - - -

Investments in mutual funds,
at current market value (Note 2):
Endeavor Series Trust:
Endeavor Money Market Portfolio 732,175 732,175 - - - -
Endeavor Asset Allocation Portfolio 4,065,558 - 4,065,558 - - -
T. Rowe Price Int'l Stock Portfolio 5,836,849 - - 5,836,849 - -
Endeavor Value Equity Portfolio 6,220,819 - - - 6,220,819 -
Dreyfus Small Cap Value Portfolio 4,248,037 - - - - 4,248,037
Dreyfus U.S. Gov't Securities Portfolio 1,329,168 - - - - -
T. Rowe Price Equity Income Portfolio 5,741,536 - - - - -
T. Rowe Price Growth Stock Portfolio 3,934,087 - - - - -
Endeavor Opportunity Value Portfolio 1,006,411 - - - - -
Endeavor Enhanced Index Portfolio 514,137 - - - - -
WRL Series Fund, Inc.:
WRL Growth Portfolio 10,971,545 - - - - -

------------- ---------- ---------- ---------- ---------- ----------
Total investments in mutual funds 44,600,322 732,175 4,065,558 5,836,849 6,220,819 4,248,037
------------- ---------- ---------- ---------- ---------- ----------
------------- ---------- ---------- ---------- ---------- ----------
Total Assets $ 44,600,333 732,186 4,065,558 5,836,849 6,220,819 4,248,037
============= ========== ========== ========== ========== ==========

Liabilities and Contract Owners' Equity

Liabilities:
Contract terminations payable $ 1,212 - 88 112 174 138
------------- ----------- ---------- ---------- ---------- ----------
Total Liabilities 1,212 - 88 112 174 138

Contract Owners' Equity:
Deferred annuity contracts terminable
by owners (Note 3 ) 44,599,121 732,186 4,065,470 5,836,737 6,220,645 4,247,899
------------- ---------- ---------- ---------- ---------- ----------
$ 44,600,333 732,186 4,065,558 5,836,849 6,220,819 4,248,037
============= ========== ========== ========== ========== ==========

<CAPTION>
Dreyfus T. Rowe T. Rowe
U.S. Price Price Endeavor Endeavor
Gov't. Equity Growth Opportunity Enhanced WRL
Securities Income Stock Value Index Growth
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Assets

Cash - - - - - -

Investments in mutual funds,
at current market value (Note 2):
Endeavor Series Trust:
Endeavor Money Market Portfolio - - - - - -
Endeavor Asset Allocation
Portfolo - - - - - -
T. Rowe Price Int'l Stock Portfolio - - - - - -
Endeavor Value Equity Portfolio - - - - - -
Dreyfus Small Cap Value Portfolio - - - - - -
Dreyfus U.S. Gov't Securities Portfo 1,329,168 - - - - -
T. Rowe Price Equity Income Portfolio - 5,741,536 - - - -
T. Rowe Price Growth Stock Portfolio - - 3,934,087 - - -
Endeavor Opportunity Value Portfolio - - - 1,006,411 - -
Endeavor Enhanced Index Portfolio - - - - 514,137 -
WRL Series Fund, Inc.:
WRL Growth Portfolio - - - - - 10,971,545

---------- ---------- ---------- ---------- -------- -----------
Total investments in mutual funds 1,329,168 5,741,536 3,934,087 1,006,411 514,137 10,971,545
---------- ---------- ---------- ---------- -------- -----------
---------- ---------- ---------- ---------- -------- -----------
Total Assets 1,329,168 5,741,536 3,934,087 1,006,411 514,137 10,971,545
========== ========== ========== ========== ======== ===========

Liabilities and Contract Owners' Equity

Liabilities:
Contract terminations payable 1 138 133 21 13 394
---------- ---------- ---------- ---------- -------- -----------
Total Liabilities 1 138 133 21 13 394

Contract Owners' Equity:
Deferred annuity contracts terminable
by owners (Note 3 ) 1,329,167 5,741,398 3,933,954 1,006,390 514,124 10,971,151
---------- ---------- ---------- ---------- -------- -----------
1,329,168 5,741,536 3,934,087 1,006,411 514,137 10,971,545
========== ========== ========== ========== ======== ===========
</TABLE>

See accompanying Notes to Financial Statements.

Page 1

<PAGE>

Ausa Endeavor Variable Annuity Account
The Endeavor Variable Annuity
Report of Independent Auditors

The Board of Directors and Contract Owners
of AUSA Endeavor Variable Annuity Account,
AUSA Life Insurance Company, Inc.

We have audited the accompanying balance sheet of AUSA Endeavor Variable
Annuity Account as of December 31, 1997, and the related statements of
operations for the year then ended and changes in contract owners' equity
for each of the two years in the period then ended. These financial
statements are the responsibility of the Variable Account's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of mutual fund shares
owned as of December 31, 1997 by correspondence with the mutual funds'
transfer agent. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of AUSA Endeavor Variable
Annuity Account at December 31, 1997, and the results of its operations for
the year then ended and changes in its contract owners' equity for each of
the two years in the period then ended in conformity with generally
accepted accounting principles.

Des Moines, Iowa
March 27, 1998

<PAGE>

AUSA Endeavor Variable Annuity Account
The Endeavor Variable Annuity
Statement of Operations
Year Ended December 31, 1997, Except as Noted
<TABLE>
<CAPTION>
T. ROWE DREYFUS
ENDEAVOR ENDEAVOR PRICE ENDEAVOR SMALL
MONEY ASSET INT'L. VALUE CAP
MARKET ALLOCATION STOCK EQUITY VALUE
TOTAL SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME (LOSS)

Income:
Dividends $1,793,847 44,587 38,881 29,602 143,560 285,550
Expenses (Note 4):
Administration fee 20,620 395 1,856 2,907 2,708 2,100
Mortality and expense risk charge 448,865 12,476 43,585 63,318 60,280 40,813
----------- ---------- ---------- ---------- ---------- ---------
Net investment income (loss) $1,324,362 31,716 (6,560) (36,623) 80,572 242,637
=========== ========== ========== ========== ========== =========

NET REALIZED & UNREALIZED CAPITAL GAIN (LOSS)
FROM INVESTMENTS

Net realized capital gain from sales of investments:
Proceeds from sales 2,397,801 514,011 288,862 384,492 279,661 128,984
Cost of investments sold 1,860,492 514,011 184,922 317,225 184,115 86,468
----------- ---------- ---------- ---------- ---------- ---------
Net realized capital gain from sales of investments 537,309 - 103,940 67,267 95,546 42,516

Net change in unrealized appreciation/depreciation
of investments:
Beginning of the period 1,762,593 - 299,221 236,578 348,773 278,785
End of the period 4,604,053 - 710,551 159,780 1,057,390 504,537
----------- ---------- ---------- ---------- ---------- ---------

Net change in unrealized appreciation/depreciation
of investments 2,841,460 - 411,330 (76,798) 708,617 225,752
----------- ---------- ---------- ---------- ---------- ---------

Net realized and unrealized capital gain (loss)
from investments 3,378,769 - 515,270 (9,531) 804,163 268,268
----------- ---------- ---------- ---------- ---------- ---------

INCREASE (DECREASE) FROM OPERATIONS $4,703,131 31,716 508,710 (46,154) 884,735 510,905
=========== ========== ========== ========== ========== =========

<CAPTION>
DREYFUS T. ROWE T. ROWE
U.S. PRICE PRICE ENDEAVOR ENDEAVOR
GOV'T. EQUITY GROWTH OPPORTUNITY ENHANCED
SECURITIES INCOME STOCK VALUE INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT (1)
---------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Net Investment Income (Loss)

Income:
Dividends 27,395 91,803 19,125 48 -
Expenses (Note 4):
Administration fee 616 2,137 1,614 174 20
Mortality and expense risk charge 12,766 53,536 37,179 8,475 1,984
--------- ----------- ----------- ---------- ----------
Net investment income (loss) 14,013 36,130 (19,668) (8,601) (2,004)
========= =========== =========== ========== ==========

NET REALIZED & UNREALIZED CAPITAL GAIN (LOSS)
FROM INVESTMENTS

Net realized capital gain from sales of investments:
Proceeds from sales 71,243 120,095 151,150 15,519 44,737
Cost of investments sold 69,154 83,161 101,677 13,735 41,970
--------- ----------- ----------- ---------- ----------
Net realized capital gain from sales of investments 2,089 36,934 49,473 1,784 2,767

Net change in unrealized appreciation/depreciation
of investments:
Beginning of the period 7,435 227,251 174,087 (106) -
End of the period 65,432 1,045,433 762,948 80,372 17,739
--------- ----------- ----------- ---------- ----------

Net change in unrealized appreciation/depreciation
of investments 57,997 818,182 588,861 80,478 17,739
--------- ----------- ----------- ---------- ----------

Net realized and unrealized capital gain (loss)
from investments 60,086 855,116 638,334 82,262 20,506
--------- ----------- ----------- ---------- ----------

INCREASE (DECREASE) FROM OPERATIONS 74,099 891,246 618,666 73,661 18,502
========= =========== =========== ========== ==========

<CAPTION>
WRL
GROWTH
SUBACCOUNT
----------
<S> <C>
Net Investment Income (Loss)

Income:
Dividends 1,113,296
Expenses (Note 4):
Administration fee 6,093
Mortality and expense risk charge 114,453
----------
Net investment income (loss) 992,750
==========

NET REALIZED & UNREALIZED CAPITAL GAIN (LOSS)
FROM INVESTMENTS

Net realized capital gain from sales of investments:
Proceeds from sales 399,047
Cost of investments sold 264,054
----------
Net realized capital gain from sales of investments 134,993

Net change in unrealized appreciation/depreciation
of investments:
Beginning of the period 190,569
End of the period 199,871
----------

Net change in unrealized appreciation/depreciation
of investments 9,302
----------

Net realized and unrealized capital gain (loss)
from investments 144,295
----------

INCREASE (DECREASE) FROM OPERATIONS 1,137,045
==========
</TABLE>

(1) Period from May 1, 1997 (commencement of operations) to December 31, 1997

See accompanying Notes to Financial Statements.

Page 2

<PAGE>

AUSA Endeavor Variable Annuity Account
The Endeavor Variable Annuity
Statements of Changes in Contract Owners' Equity
Years Ended December 31,1997 and 1996, Except as Noted

Endeavor Endeavor
Money Asset
Market Allocation
Total Subaccount Subaccount
-------------------------- ---------------------- ---------------------
1997 1996 1997 1996 1997 1996
<S>
Operations <C> <C> <C> <C> <C> <C>

Net investment income (loss) $ 1,324,362 325,302 31,716 19,314 (6,560) 4,423
Net realized capital gain (loss) 537,309 89,254 - - 103,940 16,311
Net change in unrealized appreciation/
depreciation of investments 2,841,460 1,408,104 - - 411,330 189,711
------------ ----------- ---------- ---------- ---------- ---------
Increase (decrease) from operations 4,703,131 1,822,660 31,716 19,314 508,710 210,445
------------ ----------- ---------- ---------- ---------- ---------
Contract Transactions

Net contract purchase payments 9,220,861 8,945,238 333,392 849,831 476,507 451,716
Transfer payments from (to) other subaccounts
or general account 11,407,256 3,698,118 (400,679) (403,786) 1,090,186 506,790
Contract terminations, withdrawals,
and other deductions (558,344) (390,272) - - (69,404) (68,621)
------------ ----------- ---------- ---------- ---------- ---------
Increase (decrease) from contract transactions 20,069,773 12,253,084 (67,287) 446,045 1,497,289 889,885
------------ ----------- ---------- ---------- ---------- ---------
------------ ----------- ---------- ---------- ---------- ---------
Net increase (decrease) in contract owners' equity 24,772,904 14,075,744 (35,571) 465,359 2,005,999 1,100,330
------------ ----------- ---------- ---------- ---------- ---------
Contract Owners' Equity

Beginning of the period 19,826,217 5,750,473 767,757 302,398 2,059,471 959,141
------------ ----------- ---------- ---------- ---------- ---------
End of the period $44,599,121 19,826,217 732,186 767,757 4,065,470 2,059,471
============ =========== ========== ========== ========== =========

<CAPTION>
T. Rowe Dreyfus
Price Endeavor Small
International Value Cap
Stock Equity Value
Subaccount Subaccount Subaccount
------------------------ -------------------- ---------------------
1997 1996 1997 1996 1997 1996
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Operations

Net investment income (loss) (36,623) (13,203) 80,572 14,765 242,637 30,082
Net realized capital gain (loss) 67,267 5,005 95,546 20,748 42,516 19,083
Net change in unrealized appreciation/
depreciation of investments (76,798) 214,284 708,617 288,669 225,752 233,035
--------- --------- --------- --------- -------- ---------
Increase (decrease) from operations (46,154) 206,086 884,735 324,182 510,905 282,200
--------- --------- --------- --------- -------- ----------
Contract Transactions

Net contract purchase payments 1,358,284 996,418 1,004,197 1,032,776 847,169 581,260
Transfer payments from (to) other subaccounts
or general account 1,831,294 843,943 1,750,664 598,804 1,086,084 367,127
Contract terminations, withdrawals,
and other deductions (80,849) (69,872) (72,413) (61,807) (50,547) (22,302)

----------- ----------- ----------- ----------- ----------- ----------
Increase (decrease) from contract transactions 3 ,108,729 1,770,489 2,682,448 1,569,773 1,882,706 926,085
----------- ----------- ----------- ----------- ----------- ----------
----------- ----------- ----------- ----------- ----------- ----------
Net increase (decrease) in contract owners' equity 3,062,575 1,976,575 3,567,183 1,893,955 2,393,611 1,208,285
----------- ----------- ----------- ----------- ----------- ----------
Contract Owners' Equity

Beginning of the period 2,774,162 797,587 2,653,462 759,507 1,854,288 646,003
----------- ----------- ----------- ----------- ----------- ----------
End of the period 5,836,737 2,774,162 6,220,645 2,653,462 4,247,899 1,854,288
=========== =========== =========== =========== =========== ==========

<CAPTION>
Dreyfus T. Rowe T. Rowe
U.S. Price Price
Government Equity Growth
Securities Income Stock
Subaccount Subaccount Subaccount
--------------------- ------------------------- -----------------------
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Operations

Net investment income (loss) 14,013 9,258 36,130 (6,843) $ (19,668) 1,959
Net realized capital gain (loss) 2,089 (2,573) 36,934 11,322 49,473 4,575
Net change in unrealized appreciation/
depreciation of investments 57,997 1,717 818,182 205,913 588,861 158,184
----------- --------- ----------- ----------- ----------- ---------
Increase (decrease) from operations 74,099 8,402 891,246 210,392 618,666 164,718
----------- --------- ----------- ----------- ----------- ---------
Contract Transactions

Net contract purchase payments 189,291 336,517 1,328,455 1,120,024 799,864 890,676
Transfer payments from (to) other subaccounts
or general account 415,951 111,586 1,479,634 458,878 980,121 250,896
Contract terminations, withdrawals,
and other deductions (15,899) (21,050) (69,431) (55,759) (19,352) (8,247)
----------- --------- ----------- -----------
Increase (decrease) from contract transactions 589,343 427,053 2,738,658 1,523,143 1,760,633 1,133,325
----------- --------- ----------- ----------- ----------- ----------
----------- --------- ----------- ----------- ----------- ----------
Net increase (decrease) in contract owners' equity 663,442 435,455 3,629,904 1,733,535 2,379,299 1,298,043
----------- --------- ----------- ----------- ----------- ----------
Contract Owners' Equity

Beginning of the period 665,725 230,270 2,111,494 377,959 1,554,655 256,612
----------- --------- ----------- ----------- ----------- ----------
End of the period 1,329,167 665,725 5,741,398 2,111,494 $3,933,954 1,554,655
=========== ========= =========== =========== =========== ==========

<CAPTION>
Endeavor Endeavor
Opportunity Enhanced WRL
Value Index Growth
Subaccount Subaccount Subaccount
------------------------ ------------ ----------------------
1997 1996(1) 1997(2) 1997 1996
----- ------- ------- ---- ----
<S> <C> <C> <C> <C> <C>
Operations

Net investment income (loss) (8,601) (8) (2,004) 992,750 265,555
Net realized capital gain (loss) 1,784 - 2,767 134,993 14,783
Net change in unrealized appreciation/
depreciation of investments 80,478 (106) 17,739 9,302 116,697
-------- -------- ------- ---------- --------
Increase (decrease) from operations 73,661 (114) 18,502 1,137,045 397,035
-------- -------- ------- ---------- --------

Contract Transactions

Net contract purchase payments 636,399 179,807 299,901 1,947,402 2,506,213
Transfer payments from (to) other subaccounts
or general account 127,025 - 197,261 2,849,715 963,880
Contract terminations, withdrawals,
and other deductions (10,388) - (1,540) (168,521) (82,614

Increase (decrease) from contract transactions 753,036 179,807 495,622 4,628,596 3,387,479
-------- -------- -------- --------- ---------

Net increase (decrease) in contract owners' equity 826,697 179,693 514,124 5,765,641 3,784,514
-------- -------- -------- --------- ---------
Contract Owners' Equity
Beginning of the period 179,693 - - 5,205,510 1,420,996
-------- -------- -------- --------- ---------

End of the period 1,006,390 179,693 514,124 10,971,151 5,205,510
========= ======== ========= ========== =========
</TABLE>

(1) Period from December 13, 1996 (commencement of operations) to December 31,
1996
(2) Period from May 1, 1997 (commencement of operations) to December 31, 1997

See accompanying Notes to Financial Statements.

Page 3

<PAGE>

AUSA Endeavor Variable Annuity Account
The Endeavor Variable Annuity
Notes to Financial Statements
December 31, 1997

1. Organization and Summary of Significant Accounting Policies

Organization- The AUSA Endeavor Variable Annuity Account ("Mutual Fund
Account") is a segregated investment account of AUSA Life Insurance Company,
Inc. ("AUSA Life), an indirect, wholly-owned subsidiary of AEGON nv, a
holding company organized under the laws of the Netherlands.

The Enhanced Index Subaccount commenced operations on May 1, 1997. The
Opportunity Value Subaccount commenced operations on December 13, 1996.
Effective May 1, 1996, the names of the Money Market, Managed Asset
Allocation, Quest for Value Equity, Quest for Value Small Cap, and U.S.
Government Securities Portfolios and Subaccounts were changed to TCW Money
Market, TCW Managed Asset Allocation, Value Equity, Value Small Cap, and
Dreyfus U.S. Government Securities and Portfolios and Subaccounts,
respectively. Effective October 29, 1996, the names of the Value Small Cap
Portfolio and Subaccount were changed to Dreyfus Small Cap Value Portfolio
and Subaccount, respectively. The investment advisor of the Endeavor Series
Trust is Endeavor Investment Advisors, a general partnership between Endeavor
Management Co. and AUSA Financial Markets, Inc., an affiliate of AUSA Life.
The investment advisor for the WRL Series Fund, Inc. is WRL Investment
Management , Inc. a subsidiary of Western Reserve Life Assurance Co. of Ohio,
an affiliate of AUSA Life.

The Mutual Fund Account is registered with the Securities and Exchange
Commission as a Unit Investment Trust pursuant to provisions of the
Investment Company Act of 1940.

Investments --- Net purchase payments received by the Mutual Fund Account are
invested in the portfolios of the Endeavor Series Trust, and the Growth
Portfolio of the WRL Series Fund, Inc. (collectively the "Series Funds"), as
selected by the contract owner. Investments are stated at the closing net
asset values per share on December 31, 1997.

Realized capital gains and losses from sale of shares in the Series Funds are
determined on the first-in, first-out basis. Investment transactions are
accounted for on the trade date (date the order to buy or sell is executed)
and dividend income is recorded on the ex-dividend date. Unrealized gains or
losses from investments in the Series Funds are credited or charged to
contract owners equity.

Dividend Income --- Dividends received from the Series Funds investments are
reinvested to purchase additional mutual fund shares.

<PAGE>

AUSA Endeavor Variable Annuity Account
The Endeavor Variable Annuity
Notes to Financial Statements
December 31, 1997

2. Investments
A summary of the mutual fund investment at December 31, 1997 follows:

<TABLE>
<CAPTION>
Number of Net Asset Value
Shares Held Per Share Market Value Cost
--------------- ------------------- ---------------- -------------
<S> <C> <C> <C> <C>
Endeavor Series Trust:
Endeavor Money Market Portfolio 732,175.430 $ 1.00 $ 732,175 $ 732,175
Endeavor Asset Allocation Portfolio 181,985.607 22.34 4,065,558 3,355,007
T. Rowe Price Int'l Stock Portfolio 410,467.604 14.22 5,836,849 5,677,069
Endeavor Value Equity Portfolio 300,522.634 20.70 6,220,819 5,163,429
Dreyfus Small Cap Value Portfolio 258,868.802 16.41 4,248,037 3,743,500
Dreyfus U.S. Gov't Securities Portfolio 111,977.054 11.87 1,329,168 1,263,736
T. Rowe Price Equity Income Portfolio 296,873.608 19.34 5,741,536 4,696,103
T. Rowe Price Growth Stock Portfolio 189,320.825 20.78 3,934,087 3,171,139
Endeavor Opportunity Value Portfolio 85,651.971 11.75 1,006,411 926,039
Endeavor Enhanced Index Portfolio 41,833.787 12.29 514,137 496,398
WRL Series Fund, Inc.:
WRL Growth Portfolio 297,782.142 36.844201 10,971,545 10,771,674
------------- ------------
$ 44,600,322 $ 39,996,269
============= ============
</TABLE>

The aggregate cost of purchases and proceeds from sales of investments were as
follows:

<TABLE>
<CAPTION>
Year Ended December 31, or
Commencement of Operations to December 31
-------------------------------------------------------------
1997 1996
----------------------------- -----------------------------
Purchases Sales Purchases Sales
--------------- ------------- ----------------- -----------
<S> <C> <C> <C> <C>
Endeavor Series Trust:
Endeavor Money Market Portfolio $ 478,323 514,011 880,105 414,686
Endeavor Asset Allocation Portfolio 1,779,492 288,862 986,607 92,138
T. Rowe Price Int'l Stock Portfolio 3,456,564 384,492 1,822,939 65,520
Endeavor Value Equity Portfolio 3,042,604 279,661 1,648,916 64,146
Dreyfus Small Cap Value Portfolio 2,254,509 128,984 1,110,497 154,397
Dreyfus U.S. Gov't Securities Portfolio 674,591 71,243 525,184 88,868
T. Rowe Price Equity Income Portfolio 2,894,969 120,095 1,578,572 62,231
T. Rowe Price Growth Stock Portfolio 1,892,220 151,150 1,167,599 32,296
Endeavor Opportunity Value Portfolio 759,976 15,519 179,798 -
Endeavor Enhanced Index Portfolio 538,368 44,737 - -
WRL Series Fund, Inc.:
WRL Growth Portfolio 6,020,425 399,047 3,729,079 75,787
------------ ----------- ------------- -----------

$ 23,792,041 2,397,801 13,629,296 1,050,069
============ =========== ============= ===========
</TABLE>
<PAGE>

AUSA Endeavor Variable Annuity Account
The Endeavor Variable Annuity
Notes to Financial Statements
December 31, 1997

3 Contract Owners' Equity

A summary of deferred annuity contracts terminable by owners at December 31,
1997 follows:

<TABLE>
<CAPTION>
Accumulation Accumulation Total
Subaccount Units Owned Unit Value Contract Value
---------- ------------------- ---------------- -----------------
<S> <C> <C> <C>
Endeavor Money Market 611,981.762 $ 1.196418 $ 732,186
Endeavor Asset Allocation 1,871,808.286 2.171948 4,065,470
T. Rowe Price Int'l Stock 4,334,553.810 1.346560 5,836,737
Endeavor Value Equity 2,981,906.712 2.086130 6,220,645
Dreyfus Small Cap Value 2,294,637.110 1.851229 4,247,899
Dreyfus U.S. Gov't Securities 1,093,934.793 1.215033 1,329,167
T. Rowe Price Equity Income 2,982,510.532 1.925022 5,741,398
T. Rowe Price Growth Stock 1,925,118.021 2.043487 3,933,954
Endeavor Opportunity Value 869,832.105 1.156993 1,006,390
Endeavor Enhanced Index 422,227.210 1.217647 514,124
WRL Growth 557,897.978 19.665157 10,971,151
----------------
$ 44,599,121
================
</TABLE>

<TABLE>
<CAPTION>
T. Rowe Dreyfus Dreyfus
At December 31, 1997 contract owners' equity was comprised of: Endeavor Endeavor Price Endeavor Small U.S.
Money Asset Int'l. Value Cap Gov't.
Market Allocation Stock Equity Value Securities
Total Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
----- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Unit transactions, accumulated
net investment income and
realized capital gains $ 39,995,068 732,186 3,354,919 5,676,957 5,163,255 3,743,362 1,263,735
Adjustment for appreciation/
depreciation to market value 4,604,053 - 710,551 159,780 1,057,390 504,537 65,432
------------ ------- --------- --------- --------- --------- ---------
Total Contract Owners' Equity $ 44,599,121 732,186 4,065,470 5,836,737 6,220,645 4,247,899 1,329,167
============ ======= ========= ========= ========= ========= =========

<CAPTION>
T. Rowe T. Rowe
At December 31, 1997 contract owners' equity was comprised of: Price Price Endeavor Enceavor
Equity Growth Opportunity Enhanced WRL
Income Stock Value Index Growth
Subaccount Subaccount Subaccount Subaccount Subaccount
---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Unit transactions, accumulated
net investment income and
realized capital gains 4,695,965 3,171,006 926,018 496,385 10,771,280
Adjustment for appreciation/
depreciation to market value 1,045,433 762,948 80,372 17,739 199,871
--------- --------- --------- -------- ----------
Total Contract Owners' Equity 5,741,398 3,933,954 1,006,390 514,124 10,971,151
========= ========= ========= ======== ==========
</TABLE>

<TABLE>
<CAPTION>
A summary of changes in contract owners' account units follows TCW T. Rowe Dreyfus
TCW Managed Price Endeavor Small
Money Asset Int'l. Value Cap
Market Allocation Stock Equity Value
Subaccount Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Units outstanding at 1/1/96 271,035 607,869 681,094 547,234 535,283
Units purchased 750,980 264,897 798,316 680,695 445,979
Units redeemed and transferred (356,841) 250,703 605,423 337,670 258,181
---------- ---------- --------- ---------- ----------
Units outstanding 12/31/96 665,174 1,123,469 2,084,833 1,565,599 1,239,443
Units purchased 287,198 241,650 976,337 539,580 478,443
Units redeemed and transferred (340,390) 506,689 1,273,384 876,728 576,751
---------- ---------- --------- ---------- ----------
Units outstanding 12/31/97 611,982 1,871,808 4,334,554 2,981,907 2,294,637
========== ========== ========= ========== ==========

<CAPTION>
A summary of changes in contract owners' account units follows: Dreyfus T. Rowe T. Rowe
U.S. Price Price Endeavor Endeavor
Gov't. Equity Growth Opportunity Enhanced WRL
Securities Income Stock Value Index Growth
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding at 1/1/96 204,814 293,620 189,614 - - 97,436
Units purchased 305,474 810,397 615,741 178,913 - 156,541
Units redeemed and transferred 79,492 283,590 159,303 - - 52,878
---------- ---------- ---------- ---------- ------- --------
Units outstanding 12/31/96 589,780 1,387,607 964,658 178,913 - 306,855
Units purchased 160,483 780,799 442,620 584,681 257,278 105,365
Units redeemed and transferred 343,672 814,105 517,840 106,238 164,949 145,678
---------- ---------- ---------- ---------- ------- --------
Units outstanding 12/31/97 1,093,935 2,982,511 1,925,118 869,832 422,227 557,898
========== ========== ========== ========== ======= ========
</TABLE>
<PAGE>

AUSA Endeavor Variable Annuity Account
The Endeavor Variable Annuity
Notes to Financial Statements
December 31, 1997

4 Administrative, Mortality and Expense Risk Charge

Administrative charges include an annual charge of the lesser of 2% of the
policy value or $35 per contract which will commence on the first policy
anniversary of each contract owner's account. For policies issued on or after
May 1, 1995, the fee is waived if the sum of the premium payments made less
the sum of all partial withdrawals is at least $50,000 on the policy
anniversary. Charges for administrative fees to the variable annuity contracts
are an expense of the Mutual Fund Account.

AUSA Life deducts a daily charge equal to an annual rate of 1.25% of the value
of the contract owners' account as a charge for assuming certain mortality and
expense risks. AUSA Life also deducts a daily charge equal to an annual rate
of .15% of the contract owners' account for administrative expenses.

5 Taxes

Operations of the Mutual Fund Account form a part of AUSA Life, which is taxed
as a life insurance company under Subchapter L of the Internal Revenue Code of
1986, as amended (the "Code"). The operations of the Mutual Fund Account are
accounted for separately from other operations of AUSA Life for purposes of
federal income taxation. The Mutual Fund Account is not separately taxable as
a regulated investment company under Subchapter M of the Code and is not
otherwise taxable as an entity separate from AUSA Life. Under existing federal
income tax laws, the income of the Mutual Fund Account, to the extent applied
to increase reserves under the variable annuity contracts, is not taxable to
AUSA Life.

6 Year 2000 (Unaudited)

AUSA Life and its parent have adopted and have in place a Year 2000 Assessment
and Planning Project (the "Project") to review and analyze its information
technology and systems to determine if they are Year 2000 compatible. AUSA
Life has begun to convert, remediate or modify, where necessary, critical data
processing systems. It is contemplated that the Project will be substantially
completed by early 1999. AUSA Life does not expect this Project to have a
significant effect on operations. However, to mitigate the effect of outside
influences upon the success of the Project, AUSA Life has undertaken
communications with its significant customers, suppliers and other third
parties to determine their Year 2000 compatibility and readiness. Management
believes that the issues associated with the Year 2000 will be resolved with
no material financial impact on AUSA Life.

Since the Year 2000 computer problem, and its resolution, is complex and
multifaceted, the success of a response plan cannot be conclusively known
until the Year 2000 is reached (or an earlier date to the extent that systems
or equipment addresses Year 2000 date data prior to the Year 2000). Even with
appropriate and diligent pursuit of a well-conceived Project, including
testing procedures, there is no certainty that any company will achieve
complete success. Notwithstanding the efforts or results of AUSA Life, its
ability to function unaffected to and through the Year 2000 may be adversely
affected by actions (or failure to act) of third parties beyond its knowledge
or control.

<PAGE>

PART C OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements

All required financial statements are included in Part B
of this Registration Statement.

(b) Exhibits:

(1) (a) Resolution of the Board of Directors of
AUSA Life Insurance Company, Inc. authorizing
establishment of the Mutual Fund Account.
Note 2.

(2) Not Applicable.

(3) (a) Principal Underwriting Agreement by and between
AUSA Life Insurance Company, Inc. on its own
behalf and on the behalf of the Mutual Fund
Account, and AEGON USA Securities, Inc.
Note 1.

(3) (a) (1) Principal Underwriting Agreement by and between
AUSA Life Insurance Company, Inc. on its own
behalf and on the behalf of the Mutual Fund
Account, and AFSG Securities Corporation.
Note 7.

(b) Form of Broker/Dealer Supervision and Sales
Agreement by and between AFSG Securities
Corporation and the Broker/Dealer. Note 7.

(4) (a) Form of Policy for the Endeavor Variable
Annuity. Note 2.

(b) Form of Policy Endorsement. (Dollar Cost Averaging)
Note 4.

(d) Form of Policy for the Endeavor Variable Annuity.
Note 5.

(5) (a) Form of Application for the Endeavor Variable
Annuity. Note 2.

(b) Form of Application for the Endeavor Variable
Annuity. Note 4.

(6) (a) Articles of Incorporation of AUSA
Life Insurance Company, Inc. Note 1.

(b) ByLaws of AUSA Life
Insurance Company, Inc. Note 1.

(7) Not Applicable.

(8) (a) Participation Agreement by and between
AUSA Life Insurance Company, Inc.
and Endeavor Series Trust and Addendum thereto
Note 2.

(b) Participation Agreement with WRL Series Fund,
Inc. and Addendum thereto. Note 2.

(c) Amendment to Participation Agreement by and between
AUSA Life Insurance Company, Inc., and Endeavor
Series Trust. Note 4.

(d) Amendment to Participation Agreement by and between
AUSA Life Insurance Company, Inc., and Endeavor
Series Trust. Note 5.

(9) (a) Opinion and Consent of Counsel. Note 2.

1
<PAGE>

(b) Consent of Counsel. Note 2.

(10) (a) Consent of Independent Auditors. Note 7.

(b) Opinion and Consent of Actuary Note 7.

(11) Not Applicable.

(12) Not Applicable.

(13) Performance Data Calculations. Note 2.

(14) Powers of Attorney. Note 2. (C.H. Verhagen, L.G. Brown,
W.L. Busler, J.R. Dykhouse, S.E. Frushtick, C.T. Hanson,
B.L. Jenkins, V.F. Mihaic, P.P. Post, T.A. Schlossberg,
E.K. Warren, R.J. Kontz) Note 3. (William Brown, Jr.,
Colette Vargas), (Brenda K. Clancy) Note 4.

Note 1. Filed with the initial filing of this Form N-4 Registration
Statement (File No. 33-83560) on September 1, 1994.

Note 2. Filed with Pre-Effective Amendment No. 1 to Form N-4
Registration Statement (File No. 33-83560) on December 21,
1994.

Note 3. Filed with Post-Effective Amendment No.3 to Form N-4
Registration Statement (File No. 33-83560) on April 24,
1996.

Note 4. Filed with Post-Effective Amendment No. 4 to Form N-4
Registration Statement (File No. 33-83560) on April 30,
1997.

Note 5. Filed with Post-Effective Amendment No. 5
to Form N-4 Registration Statement (File No. 33-83560)
on September 26, 1997.

Note 6. Filed with Post-Effective Amendment No. 6 to Form N-4
Registration Statement (File No. 33-83560) on
November 24, 1997.

Note 7. Filed Herewith.

Item 25. Directors and Officers of the Depositor

<TABLE>
<CAPTION>
Principal
Positions
Name and and Offices with
Business Address Depositor
- ---------------- ---------
<S> <C>
Tom A. Schlossberg Director and President
4 Manhattanville Road
Purchase, NY 10577

Larry G. Brown Director and Chairman of the Board
201 Highland Avenue
Largo, FL 33770

William L. Busler Director and Vice President
4333 Edgewood Road NE
Cedar Rapids, IA 52499

Patrick S. Baird Vice President and Chief Operating Officer
4333 Edgewood Road NE
Cedar Rapids, IA 52499
</TABLE>

2
<PAGE>

<TABLE>
<CAPTION>
<S> <C>
Craig D. Vermie Secretary
4333 Edgewood Road NE
Cedar Rapids, IA 52499

Colette Vargas Director and Chief Actuary
4 Manhattanville Road
Purchase, NY 10577

Brenda K. Clancy Treasurer
4333 Edgewood Road NE
Cedar Rapids, Iowa 52499
</TABLE>

Item 26. Persons Controlled by or Under Common Control with the
Depositor or Registrant

<TABLE>
<CAPTION>
Jurisdication of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>

AEGON N.V. Netherlands 53.63% of Vereniging Holding company
Corporation AEGON Netherlands
Membership Association

Groninger Financieringen B.V. Netherlands 100% of AEGON N.V. Holding company
Corporation Netherlands Corporation

AEGON Netherland N.V. Netherlands 100% of AEGON N.V. Holding company
Corporation Netherlands Corporation

AEGON Nevak Holding B.V. Netherlands 100% of AEGON N.V. Holding company
Corporation Netherlands Corporation

AEGON International N.V. Netherlands 100% of AEGON N.V. Holding company
Corporation Netherlands Corporation

Voting Trust Delaware Voting Trust
Trustees:
K.J. Storm
Donald J. Shepard
H.B. Van Wijk
Dennis Hersch

AEGON U.S. Holding Delaware 100% of Voting Trust Holding company
Corporation

Short Hills Management New Jersey 100% of AEGON U.S. Holding company
Company Holding Corporation

CORPA Reinsurance New York 100% of AEGON U.S. Holding company
Company Holding Corporation

AEGON Management Indiana 100% of AEGON U.S. Holding company
Company Holding Corporation

RCC North America Inc. Delaware 100% of AEGON U.S. Holding company
Holding Corporation

AEGON USA, Inc. Iowa 100% AEGON U.S. Holding company
Holding Corporation

AUSA Holding Company Maryland 100% AEGON USA, Inc. Holding company

Monumental General Insurance Maryland 100% AUSA Holding Co. Holding company
Group, Inc.

Trip Mate Insurance Agency, Inc. Kansas 100% Monumental General Sale/admin. of travel
Insurance Group, Inc. insurance

Monumental General Maryland 100% Monumental General Provides management srvcs.
Administrators, Inc. Insurance Group, Inc. to unaffiliated third party
administrator

Executive Management and Maryland 100% Monumental General Provides actuarial consulting
Consultant Services, Inc. Administrators, Inc. services

Monumental General Mass Maryland 100% Monumental General Marketing arm for sale of
Marketing, Inc. Insurance Group, Inc. mass marketed insurance
coverages

Diversified Investment Delaware 100% AUSA Holding Co. Registered investment advisor
Advisors, Inc.

Diversified Investors Securities Delaware 100% Diversified Investment Broker-Dealer
Corp. Advsiors, Inc.

AEGON USA Securities, Inc. Iowa 100% AUSA Holding Co. Broker-Dealer

Supplemental Ins. Division, Inc. Tennessee 100% AUSA Holding Co. Insurance

Creditor Resources, Inc. Michigan 100% AUSA Holding Co. Credit insurance

CRC Creditor Resources Canada 100% Creditor Resources, Inc. Insurance agency
Canadian Dealer Network Inc.

AEGON USA Investment Iowa 100% AUSA Holding Co. Investment advisor
Management, Inc.

AEGON USA Realty Iowa 100% AUSA Holding Co. Provides real estate
Advisors, Inc. administrative and real
estate investment services

Quantra Corporation Delaware 100% AEGON USA Realty Real estate and financial
Advisors, Inc. software production and sales

Quantra Software Corporation Delaware 100% Quantra Corporation Manufacture and sell
mortgage loan and security
management software

Landauer Realty Advisors, Inc. Iowa 100% AEGON USA Realty Real estate counseling
Advisors, Inc.

Landauer Associates, Inc. Delaware 100% AEGON USA Realty Real estate counseling
Advisors, Inc.

Realty Information Systems, Inc. Iowa 100% AEGON USA Realty Information Systems for
Advisors, Inc. real estate investment
management

AEGON USA Realty Iowa 100% AEGON USA Real estate management
Management, Inc Realty Advisors, Inc.

USP Real Estate Investment Trust Iowa 21.89% First AUSA Life Ins. Co. Real estate investment trust
13.11% PFL Life Ins. Co.
4.86% Bankers United Life
Assurance Co.

Cedar Income Fund, Ltd. Iowa 16.73% PFL Life Ins. Co. Real estate investment trust
3.77% Bankers United Life
Assurance Company
3.38% Life Investors Co. of America
1.97% AEGON USA Realty Advisors, Inc.
.18% First AUSA Life Ins. Co.

RCC Properties Limited Iowa AEGON USA Realty Advisors, Limited Partnership
Partnership Inc. is General Partner and 5%
owner.

AUSA Financial Markets, Inc. Iowa 100% AUSA Holding Co. Marketing

Endeavor Investment Advisors California 49.9% AUSA Financial General Partnership
Markets, Inc.

Universal Benefits Corporation Iowa 100% AUSA Holding Co. Third party administrator

Investors Warranty of Iowa 100% AUSA Holding Co. Provider of automobile
America, Inc. extended maintenance
contracts

Massachusetts Fidelity Trust Co. Iowa 100% AUSA Holding Co. Trust company

Money Services, Inc. Delaware 100% AUSA Holding Co. Provides financial counseling
for employees and agents of
affiliated companies

Zahorik Company, Inc. California 100% AUSA Holding Co. Broker-Dealer

ZCI, Inc. Alabama 100% Zahorik Company, Inc. Insurance agency

AEGON Asset Management Delaware 100% AUSA Holding Co. Registered investment advisor
Services, Inc.

Intersecurities, Inc. Delaware 100% AUSA Holding Co. Broker-Dealer

ISI Insurance Agency, Inc. California 100% Intersecurities, Inc. Insurance agency

ISI Insurance Agency Ohio 100% ISI Insurance Agency, Inc. Insurance agency
of Ohio, Inc.

ISI Insurance Agency Texas 100% ISI Insurance Agency, Inc. Insurance agency
of Texas, Inc.

ISI Insurance Agency Massachusetts 100% ISI Insurance Agency Inc. Insurance Agency
of Massachusetts, Inc.

Associated Mariner Financial Michigan 100% Intersecurities, Inc. Holding co./management
Group, Inc. services

Mariner Financial Services, Inc. Michigan 100% Associated Mariner Broker/Dealer
Financial Group, Inc.

Mariner Planning Corporation Michigan 100% Mariner Financial Financial planning
Services, Inc.

Associated Mariner Agency, Inc. Michigan 100% Associated Mariner Insurance agency
Financial Group, Inc.

Associated Mariner Agency Hawaii 100% Associated Mariner Insurance agency
of Hawaii, Inc. Agency, Inc.

Associated Mariner Ins. Agency Massachusetts 100% Associated Mariner Insurance agency
of Massachusetts, Inc. Agency, Inc.

Associated Mariner Agency Ohio 100% Associated Mariner Insurance agency
Ohio, Inc. Agency, Inc.

Associated Mariner Agency Texas 100% Associated Mariner Insurance agency
Texas, Inc. Agency, Inc.

Associated Mariner Agency New Mexico 100% Associated Mariner Insurance agency
New Mexico, Inc. Agency, Inc.

Mariner Mortgage Corp. Michigan 100% Associated Mariner Mortgage origination
Financial Group, Inc.

Idex Investor Services, Inc. Florida 100% AUSA Holding Co. Shareholder services

Idex Management, Inc. Delaware 50% AUSA Holding Co. Investment advisor
50% Janus Capital Corp.

IDEX II Series Fund Massachusetts Various Mutual fund

IDEX Fund Massachusetts Various Mutual fund

IDEX Fund 3 Massachusetts Various Mutual fund

First AUSA Life Insurance Maryland 100% AEGON USA, Inc. Insurance holding company
Company

AUSA Life Insurance New York 100% First AUSA Life Insurance
Company, Inc. Insurance Company

Life Investors Insurance Iowa 100% First AUSA Life Ins. Co. Insurance
Company of America

Bankers United Life Iowa 100% Life Investors Ins. Insurance
Assurance Company Company of America

Life Investors Agency Iowa 100% Life Investors Ins. Marketing
Group, Inc. Company of America

PFL Life Insurance Company Iowa 100% First AUSA Life Ins. Co. Insurance

AEGON Financial Services Minnesota 100% PFL Life Insurance Co. Marketing
Group, Inc.

AEGON Assignment Corporation Kentucky 100% AEGON Financial Administrator of structured
Services Group, Inc. settlements

Southwest Equity Life Ins. Co. Arizona 100% of Common Voting Stock Insurance
First AUSA Life Ins. Co.

Iowa Fidelity Life Insurance Co. Arizona 100% of Common Voting Stock Insurance
First AUSA Life Ins. Co.

Western Reserve Life Assurance Ohio 100% First AUSA Life Ins. Co. Insurance
Co. of Ohio

WRL Series Fund, Inc. Maryland Various Mutual fund

WRL Investment Services, Inc. Florida 100% Western Reserve Life Provides administration for
Assurance Co. of Ohio affiliated mutual fund

WRL Investment Florida 100% Western Reserve Life Registered investment advisor
Management, Inc. Assurance Co. of Ohio

Monumental Life Insurance Co. Maryland 100% First AUSA Life Ins. Co. Insurance

AEGON Special Markets Maryland 100% Monumental Life Ins. Co. Marketing
Group, Inc.

Monumental General Casualty Co. Maryland 100% First AUSA Life Ins. Co. Insurance

United Financial Services, Inc. Maryland 100% First AUSA Life Ins. Co. General agency

Bankers Financial Life Ins. Co. Arizona 100% First AUSA Life Ins. Co. Insurance

The Whitestone Corporation Maryland 100% First AUSA Life Ins. Co. Insurance agency

Cadet Holding Corp. Iowa 100% First AUSA Life Holding company
Insurance Company

Commonwealth General Delaware 100% AEGON USA Holding company
Corporation ("CGC")

PB Series Trust Massachusetts N/A Mutual fund

Monumental Agency Group, Inc. Kentucky 100% CGC Provider of srvcs. to ins. cos.

Benefit Plans, Inc. Delaware 100% CGC TPA for Peoples Security Life
Insurance Company

Durco Agency, Inc. Virginia 100% Benefit Plans, Inc. General agent

Commonwealth General Kentucky 100% CGC Administrator of structured
Assignment Corporation settlements

Providian Financial Services,
Inc. Pennsylvania 100% CGC Financial services

AFSG Securities Corporation Pennsylvania 100% CGC Broker-Dealer

PB Investment Advisors, Inc. Delaware 100% CGC Registered investment advisor

Diversified Financial Products
Inc. Delaware 100% CGC Provider of investment,
marketing and admin.
services to ins. cos.

AEGON USA Real Estate Delaware 100% Diversified Financial Real estate and mortgage
Services, Inc. Products Inc. holding company

Capital Real Estate Delaware 100% CGC Furniture and equiment lessor
Development Corporation

Capital General Development Delaware 100% CGC Holding company
Corporation

Commonwealth Life Kentucky 100% Capital General Insurance company
Insurance Company Development Corporation

Agency Holding I, Inc. Delaware 100%Commonwealth Life Investment subsidiary
Insurance Company

Agency Investments I, Inc. Delaware 100% Agency Holding I, Inc. Investment subsidiary

Peoples Security Life North Carolina 100% Capital General Insurance company
Insurance Company Development Corporation

Ammest Realty Corporation Texas 100% Peoples Security Life Special purpose subsidiary
Insurance Company

Agency Holding II, Inc. Delaware 100% Peoples Security Life Investment subsidiary
Insurance Company

Agency Investments II, Inc. Delaware 100% Agency Holding II, Inc. Investment subsidiary

Agency Holding III, Inc. Delaware 100% Peoples Security Life Investment subsidiary
Insurance Company

Agency Investments III, Inc. Delaware 100% Agency Holding III, Inc. Investment subsidiary

JMH Operating Company, Inc. Mississippi 100% Peoples Security Life Real estate holdings
Insurance Company

Capital Security Life Ins. Co. North Carolina 100% Capital General Insurance company
Development Corporation

Independence Automobile Florida 100% Capital Security Automobile Club
Association, Inc. Life Insurance Company

Independence Automobile Georgia 100% Capital Security Automobile Club
Club, Inc. Life Insurance Company

Capital 200 Block Corporation Delaware 100% CGC Real estate holdings

Capital Broadway Corporation Kentucky 100% CGC Real estate holdings

Southlife, Inc. Tennessee 100% CGC Investment subsidiary

Ampac Insurance Agency, Inc. Pennsylvania 100% CGC Provider of management
(EIN 23-1720755) support services

National Home Life Corporation Pennsylvania 100% Ampac Insurance Special-purpose subsidiary
Agency, Inc.

Compass Rose Development Pennsylvania 100% Ampac Insurance Special-purpose subsidiary
Corporation Agency, Inc.

Association Consultants, Inc. Illinois 100% Ampac Insurance TPA license-holder
Agency, Inc.

Valley Forge Associates, Inc. Pennsylvania 100% Ampac Insurance Furniture & equipment lessor
Agency, Inc.

Veterans Benefits Plans, Inc. Pennsylvania 100% Ampac Insurance Administator of group
Agency, Inc. insurance programs

Veterans Insurance Services, Inc. Delaware 100% Ampac Insurance Special-purpose subsidiary
Agency, Inc.

Financial Planning Services, Inc. Dist. Columbia 100% Ampac Insurance Special-purpose subsidiary
Agency, Inc.

Providian Auto and Home Missouri 100% CGC Insurance company
Insurance Company

Academy Insurance Group, Inc. Delaware 100% CGC Holding company

Academy Life Insurance Co. Missouri 100% Academy Insurance Insurance company
Group, Inc.

Pension Life Insurance New Jersey 100% Academy Insurance Insurance company
Company of America Group, Inc.

Academy Services, Inc. Delaware 100% Academy Insurance Special-purpose subsidiary
Group, Inc.

Ammest Development Corp. Inc. Kansas 100% Academy Insurance Special-purpose subsidiary
Group, Inc.

Ammest Insurance Agency, Inc. California 100% Academy Insurance General agent
Group, Inc.

Ammest Massachusetts Massachusetts 100% Academy Insurance Special-purpose subsidiary
Insurance Agency, Inc. Group, Inc.

Ammest Realty, Inc. Pennsylvania 100% Academy Insurance Special-purpose subsidiary
Group, Inc.

Ampac, Inc. Texas 100% Academy Insurance Managing general agent
Group, Inc.

Ampac Insurance Agency, Inc. Pennsylvania 100% Academy Insurance Special-purpose subsidiary
(EIN 23-2364438) Group, Inc.

Data/Mark Services, Inc. Delaware 100% Academy Insurance Provider of mgmt. services
Group, Inc.

Force Financial Group, Inc. Delaware 100% Academy Insurance Special-purpose subsidiary
Group, Inc.

Force Financial Services, Inc. Massachusetts 100% Force Fin. Group, Inc. Special-purpose subsidiary

Military Associates, Inc. Pennsylvania 100% Academy Insurance Special-purpose subsidiary
Group, Inc.

NCOA Motor Club, Inc. Georgia 100% Academy Insurance Automobile club
Group, Inc.

NCOAA Management Company Texas 100% Academy Insurance Special-purpose subsidiary
Group, Inc.

Unicom Administrative Pennsylvania 100% Academy Insurance Provider of admin. services
Services, Inc. Group, Inc.

Unicom Administrative Germany 100%Unicom Administrative Provider of admin. services
Services, GmbH Services, Inc.

Providian Property and Casualty Kentucky 100% Providian Auto and Insurance company
Insurance Company Home Insurance Company

Providian Fire Insurance Co. Kentucky 100% Providian Property Insurance company
and Casualty Insurance Co.

Capital Liberty, L.P. Delaware 79.2% Commonwealth Life Holding Company
Insurance Company
19.8% Peoples Security Life
Insurance Company
1% CGC

Commonwealth General LLC Turks & 100% CGC Special-purpose subsidiary
Caicos Islands

Providian Life and Health Missouri 3.7% CGC Insurance company
Insurance Company 15.3% Peoples Security Life
Insurance Company
20% Capital Liberty, L.P.
61% Commonwealth Life
Insurance Company

Veterans Life Insurance Co. Illinois 100% Providian Life and Insurance company
Health Insurance Company

Peoples Benefit Services, Inc. Pennsylvania 100% Veterans Life Ins. Co. Special-purpose subsidiary

First Providian Life and New York 100% Veterans Life Ins. Co. Insurance Company
Health Insurance Company
</TABLE>

3
<PAGE>

Item 27. Number of Policyowners

As of December 31, 1997, there were 1,211 Owners of the

Policies.

Item 28. Indemnification

The New York Code (Sections 721 et. seq.) provides for permissive
--------
indemnification in certain situations, mandatory indemnification in other
situations, and prohibits indemnification in certain situations. The Code
also specifies procedures for determining when indemnification payments can
be made.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the Depositor pursuant to the foregoing provisions, or otherwise, the
Depositor has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Depositor of expenses incurred or paid by a director, officer or
controlling person in connection with the securities being registered), the
Depositor will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

Item 29. Principal Underwriter

AFSG Securities Corporation
4333 Edgewood Road, N.E.
Cedar Rapids, IA 52499-0001

The directors and officers of
AFSG Securities Corporation
are as follows:/5/

4
<PAGE>

Larry N. Norman Sarah J. Strange
Director and President Director and Vice President

Harvey E. Willis Brenda K. Clancy
Vice President and Secretary Vice President

Lisa Wachendorf Michael G. Ayers
Compliance Officer Treasurer/Controller

Debra C. Cubero Colleen S. Lyons
Vice President Assistant Secretary

Gregory J. Garvin John F. Reesor
Vice President Assistant Secretary

Michael F. Lane
Vice President
Anne Spaes
Vice President
_____________________
/5/ The principal business address of each person listed is AFSG Securities
Corporation, 4333 Edgewood Road, N.E., Cedar Rapids, IA 52499-0001.

Commissions and Other Compensation Received by Principal Underwriter.
- --------------------------------------------------------------------

AEGON USA Securities, Inc., the former broker/dealer, and/or the broker-
dealers received $1,430,319.48 from the Registrant during the last fiscal year
for its services in distributing the Policies. No other commission or
compensation was received by the principal underwriter, directly or indirectly,
from the Registrant during the fiscal year.

Prior to May 1, 1998, AEGON USA Securities, Inc. served as the principal
underwriter for the PFL Endeavor VA Separate Account, the PFL Retirement Builder
Variable Annuity Account, the PFL Life Variable Annuity Account A, the PFL
Wright Variable Annuity Account and the AUSA Endeavor Variable Annuity Account.
These accounts are separate accounts of PFL Life Insurance Company or AUSA Life
Insurance Company, Inc., life insurance company affiliates of AEGON USA
Securities, Inc.. As of May 1, 1998, AFSG Securities Corporation will serve as
the principal underwriter for the above named Accounts. AFSG Securities
Corporation also serves as principal underwriter for the Separate Account I,
Separate Account II, and Separate Account V of Providian Life and Health
Insurance Company, and for Separate Account C of First Providian Life and Health
Insurance Company.

Item 30. Location of Accounts and Records

The records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 to 31a-3 promulgated thereunder,
are maintained by AUSA Life Insurance Company,

5
<PAGE>

Inc. at 666 Fifth Avenue, New York, New York 10103, or its Service Office,
Financial Markets Division - Variable Annuity Dept., 4333 Edgewood Road N.E.,
Cedar Rapids, Iowa 52499.

Item 31. Management Services.

All management Policies are discussed in Part A or
Part B.

Item 32. Undertakings

(a) Registrant undertakes that it will file a post-effective
amendment to this registration statement as frequently as necessary to ensure
that the audited financial statements in the registration statement are never
more than 16 months old for so long as Premiums under the Policy may be
accepted.

(b) Registrant undertakes that it will include either (i) a
postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information or (ii) a space in the Policy application that an applicant can
check to request a Statement of Additional Information.

(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request to AUSA at the address or phone
number listed in the Prospectus.

(d) AUSA Life Insurance Company hereby represents that the fees and
charges deduted under the policies, in the aggregate, are reasonable in relation
to the services rendered, the expenses expected to be incurred, and the risks
assumed by AUSA Life Insurance Company.

Section 403(b) Representations
- ------------------------------

AUSA represents that it is relying on a no-action letter dated
November 28, 1988, to the American Council of Life Insurance (Ref. No.
IP-6-88), regarding Sections 22(e), 27(c)(1), and 27(d) of the Investment
Company Act of 1940, in connection with redeemability restrictions on
Section 403(b) Policies, and that paragraphs numbered (1) through (4) of
that letter will be complied with.

6
<PAGE>

SIGNATURES

As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant hereby certifies that this Amendment to the Registration
Statement meets the requirements for effectiveness pursuant to paragraph (b) of
Rule 485 and has caused this Registration Statement to be signed on its behalf,
in the City of Cedar Rapids and State of Iowa, on this 20th day of April, 1998.

AUSA ENDEAVOR VARIABLE
ANNUITY ACCOUNT

AUSA LIFE INSURANCE
COMPANY, INC.
Depositor

/s/ Tom A. Schlossberg
-----------------------
Tom A. Schlossberg
President

As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the duties indicated.

Signatures Title Date
- ---------- ----- -----
<S> <C> <C>

/s/ William Brown, Jr. Director April 20, 1998
- --------------------------
William Brown, Jr.

/s/ Larry G. Brown Director April 20, 1998
- --------------------------
Larry G. Brown

/s/ William L. Busler Director April 20, 1998
- --------------------------
William L. Busler

/s/ Jack R. Dykhouse Director April 20, 1998
- --------------------------
Jack R. Dykhouse

/s/ Steven E. Frushtick Director April 20, 1998
- --------------------------
Steven E. Frushtick

/s/ Carl T. Hanson Director April 20, 1998
- --------------------------
Carl T. Hanson

/s/ B. Larry Jenkins Director April 20, 1998
- --------------------------
B. Larry Jenkins

</TABLE>

<PAGE>

/s/ Colette Vargas Director April 20, 1998
- --------------------------
Colette Vargas

/s/ Vera F. Mihaic Director April 20, 1998
- --------------------------
Vera F. Mihaic

/s/ Peter P. Post Director April 20, 1998
- --------------------------
Peter P. Post

/s/ Tom A. Schlossberg Director April 20, 1998
- -------------------------- (Principal Executive Officer)
Tom A. Schlossberg

/s/ Cor H. Verhagen Director April 20, 1998
- --------------------------
Cor H. Verhagen

/s/ E. Kirby Warren Director April 20, 1998
- --------------------------
E. Kirby Warren

/s/ Brenda K. Clancy Treasurer April 20, 1998
- --------------------------
Brenda K. Clancy

</TABLE>

<PAGE>

Registration No.
33-83560

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________

EXHIBITS

FORM N-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

FOR

AUSA ENDEAVOR VARIABLE ANNUITY ACCOUNT

_______________
<PAGE>

EXHIBIT INDEX
-------------

<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Page No.*
- ----------- ---------------------- ---------
<S> <C> <C>
(3)(a)(1) Principal Underwriting Agreement by and between AUSA
Life Insurance Company, Inc. on its own behalf and on
the behalf of the Mutual Fund Account, and AFSG
Securities Corporation.

(3)(b) Form of Broker/Dealer Supervision and Sales Agreement by
and between AFSG Securities Corporation and the
Broker/Dealer.

(10)(a) Consent of Independent Auditors

(10)(b) Opinion and Consent of Actuary
</TABLE>

- -------------------------------
* Page numbers included only in manually executed original.

<PAGE>

EXHIBIT (3)(a)(1)
-----------------

PRINCIPAL UNDERWRITING AGREEMENT
BY AND BETWEEN AUSA LIFE INSURANCE COMPANY, INC.
ON ITS OWN BEHALF AND ON THE BEHALF OF
THE MUTUAL FUND ACCOUNT
AND AFSG SECURITIES CORPORATION.
<PAGE>

PRINCIPAL UNDERWRITING AGREEMENT

THIS PRINCIPAL UNDERWRITING AGREEMENT made and effective as of the 30th day
of April, 1998, by and between AFSG SECURITIES CORPORATION ("AFSG"), a
Pennsylvania corporation, and AUSA LIFE INSURANCE COMPANY, INC. ("AUSA"), a New
York corporation, on its own behalf and on behalf the separate investment
accounts of AUSA set forth in Exhibit A attached hereto and made a part hereof
---------
(collectively, the "Account").

WITNESSETH:

WHEREAS, the Account was established or acquired by AUSA under the laws of
the State of New York, pursuant to a resolution of AUSA's Board of Directors in
order to set aside the investment assets attributable to certain flexible
premium, multi-funded annuity contracts ("Contracts") issued by AUSA;

WHEREAS, AUSA has registered or will register the Account with the
Securities and Exchange Commission ("SEC") as a unit investment trust under the
Investment Company Act of 1940 (the "1940 Act");

WHEREAS, AUSA has registered or will register the Contracts under the
Securities Act of 1933 (the "1933 Act");

WHEREAS, AFSG is and will continue to be registered as a broker-dealer with
the SEC under the Securities Exchange Act of 1934 (the "1934 Act"), and a member
of the National Association of Securities Dealers, Inc. (the "NASD") prior to
the offer and sale of the Contracts; and

WHEREAS, AUSA proposes to have the Contracts sold and distributed through
AFSG, and AFSG is willing to sell and distribute such Contracts under the terms
stated herein;

NOW, THEREFORE, the parties, intending to be legally bound, hereby agree
as follows:

<PAGE>

1. Appointment as Distributor/Principal Underwriter. AUSA grants to AFSG
------------------------------------------------
the exclusive right to be, and AFSG agrees to serve as, distributor and
principal underwriter of the Contracts during the term of this Agreement. AFSG
agrees to use its best efforts to solicit applications for the Contracts and
otherwise perform all duties and functions which are necessary and proper for
the distribution of the Contracts.

2. Prospectus. AFSG agrees to offer the Contracts for sale in accordance
----------
with the registration statements and prospectus therefor then in effect. AFSG
is not authorized to give any information or to make any representations
concerning the Contracts other than those contained in the current prospectus
therefor filed with the SEC or in such sales literature as may be authorized by
AUSA.

3. Considerations. All premiums, purchase payments or other moneys
--------------
payable under the Contracts shall be remitted promptly in full together with
such application, forms and any other required documentation to AUSA or its
designated servicing agent and shall become the exclusive property of AUSA.
Checks or money orders in payment under the Contracts shall be drawn to the
order of "AUSA Life Insurance Company, Inc." and funds may be remitted by wire
if prior written approval is obtained from AUSA.

4. Copies of Information. On behalf of the Account, AUSA shall furnish
---------------------
AFSG with copies of all prospectuses, financial statements and other documents
which AFSG reasonably requests for use in connection with the distribution of
the Contracts.

5. Representations. AFSG represents that it is (a) duly registered as a
---------------
broker-dealer under the 1934 Act, (b) a member in good standing of the NASD and
(c) to the extent necessary to offer the Contracts, duly registered or otherwise
qualified under the securities laws of any state or other jurisdiction. AFSG
shall be responsible for carrying out its sales and underwriting obligations
hereunder in continued compliance with the NASD Rules and federal and state
securities and insurance laws and regulations. Further, AFSG represents and
warrants that it will

2
<PAGE>

adopt, abide by and enforce the principles set forth in the Principles and Code
of Ethical Market Conduct of the Insurance Marketplace Standards Association as
adopted by the Company.

6. Other Broker-Dealer Agreements. AFSG is hereby authorized to enter
------------------------------
into written sales agreements with other independent broker-dealers for the sale
of the Contracts. All such sales agreements entered into by AFSG shall provide
that each independent broker-dealer will assume full responsibility for
continued compliance by itself and by its associated persons with the NASD Rules
and applicable federal and state securities and insurance laws, shall provide
that each independent broker-dealer will adopt, abide by and enforce the
principles set forth in the Principles and Code of Ethical Market Conduct of the
Insurance Marketplace Standards Association as adopted by the Company, and shall
be in such form and contain such other provisions as AUSA may from time to time
require. All associated persons of such independent broker-dealers soliciting
applications for the Contracts shall be duly and appropriately registered by the
NASD and licensed and appointed by AUSA for the sale of Contracts under the
insurance laws of the applicable states or jurisdictions in which such Contracts
may be lawfully sold. All applications for Contracts solicited by such broker-
dealers through their representatives, together with any other required
documentation and premiums, purchase payments and other moneys, shall be handled
as set forth in paragraph 3 above.

7. Insurance Licensing and Appointments. AUSA shall apply for the proper
------------------------------------
insurance licenses and appointments in appropriate states or jurisdictions for
the designated persons associated with AFSG or with other independent broker-
dealers that have entered into sales agreements with AFSG for the sale of
Contracts, provided that AUSA reserves the right to refuse to appoint any
proposed registered representative as an agent or broker, and to terminate an
agent or broker once appointed.

8. Recordkeeping. AUSA and AFSG shall cause to be maintained and
-------------
preserved for the periods prescribed such accounts, books, and other documents
as are required of them by

3
<PAGE>

the 1940 Act, and 1934 Act, and any other applicable laws and regulations. The
books, accounts and records of AUSA, of the Account, and of AFSG as to all
transactions hereunder shall be maintained so as to disclose clearly and
accurately the nature and details of the transactions. AUSA (or such other
entity engaged by AUSA for this purpose), on behalf of and as agent for AFSG,
shall maintain AFSG's books and records pertaining to the sale of Contracts to
the extent as mutually agreed upon from time to time by AUSA and AFSG; provided
that such books and records shall be the property of AFSG, and shall at all
times be subject to such reasonable periodic, special or other audit or
examination by the SEC, NASD, any state insurance commissioner and/or all other
regulatory bodies having jurisdiction. AUSA shall be responsible for sending
on behalf of and as agent for AFSG all required confirmations on customer
transactions in compliance with applicable regulations, as modified by an
exemption or other relief obtained by AUSA. AFSG shall cause AUSA to be
furnished with such reports as AUSA may reasonably request for the purpose of
meeting its reporting and recordkeeping requirements under the insurance laws
of the State of New York and any other applicable states or jurisdictions.
AUSA agrees that its records relating to the sale of Contracts shall be subject
to such reasonable periodic, special or other audit or examination by the SEC,
NASD, and any state insurance commissioner and/or all other regulatory bodies
having jurisdiction.

9. Commissions. AUSA shall have the responsibility for paying on behalf
-----------
of AFSG (a) any compensation to other independent broker-dealers and their
associated persons due under the terms of any sales agreements entered into
pursuant to paragraph 6 above, between AFSG and such broker-dealers as agreed to
by AUSA and (b) all commissions or other fees to associated persons of AFSG
which are due for the sale of the Contracts in the amounts and on such terms and
conditions as AUSA and AFSG determine. Notwithstanding the preceding sentence,
no broker-dealer, associated person or other individual or entity shall have an
interest in any deductions or other fees payable to AFSG as set forth herein.

4
<PAGE>

10. Expense Reimbursement. AUSA shall reimburse AFSG for all costs and
---------------------
expenses incurred by AFSG in furnishing the services, materials, and supplies
required by the terms of this Agreement.

11. Indemnification. AUSA agrees to indemnify AFSG for any losses
---------------
incurred as a result of any action taken or omitted by AFSG, or any of its
officers, agents or employees, in performing their responsibilities under this
Agreement in good faith and without willful misfeasance, gross negligence, or
reckless disregard of such obligations.

12. Regulatory Investigations. AFSG and AUSA agree to cooperate fully in
-------------------------
any insurance or judicial regulatory investigation or proceeding arising in
connection with Contracts distributed under this Agreement. AFSG and AUSA
further agree to cooperate fully in any securities regulatory inspection,
inquiry, investigation or proceeding or any judicial proceeding with respect to
AUSA, AFSG, their affiliates and their representatives to the extent that such
inspection, inquiry, investigation or proceeding or judicial proceeding is in
connection with Contracts distributed under this Agreement. Without limiting
the foregoing:

(a) AFSG will be notified promptly of any customer complaint or notice of
any regulatory inspection, inquiry investigation or proceeding or judicial
proceeding received by AUSA with respect to AFSG or any representative or which
may affect AUSA's issuance of any Contracts marketed under this Agreement; and

(b) AFSG will promptly notify AUSA of any customer complaint or notice of
any regulatory inspection, inquiry, investigation or judicial proceeding
received by AFSG or any representative with respect to AUSA or its affiliates in
connection with any Contracts distributed under this Agreement.

In the case of a customer complaint, AFSG and AUSA will cooperate in
investigating such complaint and shall arrive at a mutually satisfactory
response.

5
<PAGE>

13. Termination.
-----------

(a) This Agreement may be terminated by either party hereto upon 60 days'
prior written notice to the other party.

(b) This Agreement may be terminated upon written notice of one party to
the other party hereto in the event of bankruptcy or insolvency of such party to
which notice is given.

(d) AFSG shall not assign or delegate its responsibilities under this
Agreement without the written consent of AUSA.

(e) Upon termination of this Agreement, all authorizations, rights and
obligations shall cease except the obligations to settle accounts hereunder,
including payments or premiums or contributions subsequently received for
Contracts in effect at the time of termination or issued pursuant to
applications received by AUSA prior to termination.

14. Regulatory Impact. This Agreement shall be subject to, among other
-----------------
laws, the provisions of the 1940 Act and the 1934 Act and the rules,
regulations, and rulings thereunder and of the NASD, from time to time in
effect, including such exemptions from the 1940 Act as the SEC may grant, and
the terms hereof shall be interpreted and construed in accordance therewith.

AFSG shall submit to all regulatory and administrative bodies having
jurisdiction over the operations of the Account, present or future; and will
provide any information, reports or other material which any such body by reason
of this Agreement may request or require pursuant to applicable laws or
regulations.

15. Severability. If any provision of this Agreement shall be held or
------------
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.

6
<PAGE>

16. Choice of Law. This Agreement shall be construed, enforced and
-------------
governed by the laws of the State of New York.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective duly authorized officials as of the day and year
first above written.

AFSG SECURITIES CORPORATION AUSA LIFE INSURANCE COMPANY, INC.

By: /s/ Lorri E. Mehaffey By: /s/ William L. Busler

Title: President Title: Vice President

7
<PAGE>

EXHIBIT A

1. AUSA Endeavor Variable Annuity Account

<PAGE>

EXHIBIT (3)(b)
--------------

FORM OF BROKER/DEALER SUPERVISION AND SALES AGREEMENT
BY AND BETWEEN
AFSG SECURITIES CORPORATION
AND THE BROKER/DEALER.

<PAGE>

SELECTED BROKER AGREEMENT

AGREEMENT dated , 19 , by and between AFSG
---------------------------- ----
Securities Corporation ("Distributor"), a Pennsylvania corporation, AUSA Life
Insurance Company, Inc. ("Company") and
--------------------------------------
("Broker"), a corporation. This Agreement
- ------------------- --------------------
supersedes and replaces any prior Selected Broker Agreement regarding the
subject matter between the parties hereto.

WITNESSETH:
In consideration of the mutual promises contained herein, the parties hereto
agree as follows:
A. Definitions
-----------
(1) Contracts--Variable life insurance contracts and/or variable annuity
contracts described in Schedule A attached hereto and issued by AUSA Life
Insurance Company, Inc. and for which Distributor has been appointed the
principal underwriter pursuant to Distribution Agreements, copies of
which have been furnished to Broker.
(2) Accounts--Separate accounts established and maintained by Company
pursuant to the laws of New York, as applicable, to fund the benefits
under the Contracts.
(3) The Funds--, open-end management investment companies registered under
the 1940 Act, shares of which are sold to the Accounts in connection with
the sale of the Contracts, as described in the Prospectus for the
Contracts.
(4) Registration Statement--The registration statements and amendments
thereto relating to the Contracts, the Accounts, and the Funds, including
financial statements and all exhibits.
(5) Prospectus--The prospectuses included within the Registration Statements.
(6) 1933 Act--The Securities Act of 1933, as amended.
(7) 1934 Act--The Securities Exchange Act of 1934, as amended.
(8) 1940 Act--The Investment Company Act of 1940, as amended.
(9) SEC--The Securities and Exchange Commission.
(10) NASD--The National Association of Securities Dealers, Inc.
B. Agreements of Distributor
-------------------------
(1) Pursuant to the authority delegated to it by Company, Distributor hereby
authorizes Broker during the term of this Agreement to solicit
applications for Contracts from eligible persons provided that there is
an effective Registration Statement relating to such Contracts and
provided further that Broker has been notified by Distributor that the
Contracts are qualified for sale under all applicable securities and
insurance laws of the state or jurisdiction in which the application will
be solicited. In connection with the solicitation of applications for
Contracts, Broker is hereby authorized to offer riders that are available
with the Contracts in accordance with instructions furnished by
Distributor or Company.
(2) Distributor, during the term of this Agreement, will notify Broker of the
issuance by the SEC of any stop order with respect to the Registration
Statement or any amendments thereto or the initiation of any proceedings
for that purpose or for any other purpose relating to the registration
and/or offering of the Contracts and of any other action or circumstance
that may prevent the lawful sale of the Contracts in any state or
jurisdiction.
(3) During the term of this Agreement, Distributor shall advise Broker of any
amendment to the Registration Statement or any amendment or supplement to
any Prospectus.
C. Agreements of Broker
--------------------
(1) It is understood and agreed that Broker is a registered broker/dealer
under the 1934 Act and a member of the NASD and that the agents or
representatives of Broker who will be soliciting applications for the
Contracts also will be duly registered representative of Broker.
(2) Commencing at such time as Distributor and Broker shall agree upon,
Broker agrees to use commercially reasonable efforts to find purchasers
for the Contracts acceptable to Company. In meeting its obligation to use
its commercially reasonable efforts to solicit applications for
Contracts, Broker shall, during the term of this Agreement, engage in the
following activities:
(a) Regularly utilize only training, sales and promotional materials
relating to the Contracts which have been approved by Company.
(b) Establish and implement reasonable procedures for periodic inspection
and supervision of sales practices of its agents or representatives and
submit periodic reports to Distributor as may be requested on the results
of such inspections and the compliance with such procedures.
(c) Broker shall take reasonable steps to ensure that the various
representatives appointed by it shall not make recommendations to an
applicant to purchase a Contract in the absence of reasonable grounds to
believe that

<PAGE>

the purchase of the Contract is suitable for such applicant.
While not limited to the following, a determination of suitability shall
be based on information furnished to a representative after reasonable
inquiry of such applicant concerning the applicant's insurance and
investment objectives, financial situation and needs, and, if applicable,
the likelihood that the applicant will make the premium payments
contemplated by the Contract.
(d) Broker shall adopt, abide by, and enforce the principles set forth in
the Principles and Code of Ethical market Conduct of the Insurance
Marketplace Standards Association as adopted by the Company and provided
to You with this Agreement.
(3) All payments for Contracts collected by agents or representatives of
Broker shall be held at all times in a fiduciary capacity and shall be
remitted promptly in full together with such applications, forms and
other required documentation to an office of the Company designated by
Distributor. Checks or money orders in payment of initial premiums shall
be drawn to the order of "AUSA Life Insurance Company, Inc." Broker
acknowledges that the Company retains the ultimate right to control the
sale of the Contracts and that the Distributor or Company shall have the
unconditional right to reject, in whole or part, any application for the
Contract. In the event Company or Distributor rejects an application,
Company immediately will return all payments directly to the purchaser
and Broker will be notified of such action. In the event that any
purchaser of a Contract elects to return such Contract pursuant to the
free look right, the purchaser will receive a refund of either premium
payments or the value of the invested portion of such premiums as set
forth in the Contract and according to applicable state law. The Broker
will be notified of any such action.
(4) Broker shall act as an independent contractor, and nothing herein
contained shall constitute Broker, its agents or representatives, or any
employees thereof as employees of Company or Distributor in connection
with solicitation of applications for Contracts. Broker, its agents or
representatives, and its employees shall not hold themselves out to be
employees of Company or Distributor in this connection or in any dealings
with the public.
(5) Broker agrees that any material, including material it develops, approves
or uses for sales, training, explanatory or other purposes in connection
with the solicitation of applications for Contracts hereunder (other than
generic advertising materials which do not make specific reference to the
Company or the Contracts) will only be used after receiving the written
consent of Distributor to such material and, where appropriate, the
endorsement of Company to be obtained by Distributor.
(6) Solicitation and other activities by Broker shall be undertaken only in
accordance with applicable Company procedures, ethical principles and
manuals, and applicable laws and regulations. No agent or representative
of Broker shall solicit applications for the contracts until duly
licensed and appointed by Company (such appointment not to be
unreasonably withheld by the Company) as a life insurance and variable
contract broker or agent of Company in the appropriate states or other
jurisdictions. Broker shall ensure that such agents or representatives
fulfill any training requirements necessary to be licensed and that such
agents or representatives are properly supervised and controlled pursuant
to the rules and regulations of the SEC and the NASD. Broker shall
certify agents' and representatives' qualifications to the satisfaction
of Distributor, including certifying a General Letter of Recommendation
set forth in Exhibit A hereto. Broker understands and acknowledges that
neither it nor its agents or representatives is authorized by Distributor
or Company to give any information or make any representation in
connection with this Agreement or the offering of the Contracts other
than those contained in the Prospectus or other solicitation material
authorized in writing by Distributor or Company.
(7) Broker shall not have authority on behalf of Distributor or Company to:
make, alter or discharge any Contract or other form; waive any
forfeiture, extend the time of paying any premium; receive any monies or
premiums due, or to become due, to Company, except as set forth in
Section C(3) of this Agreement. Broker shall not expend, nor contract for
the expenditure of the funds of Distributor, nor shall Broker possess or
exercise any authority on behalf of Broker by this Agreement.
(8) Broker shall have the responsibility for maintaining the records of its
representatives licensed, registered and otherwise qualified to sell the
Contracts. Broker shall maintain such other records as are required of it
by applicable laws and regulations. The books, accounts and records of
the Company, the Account, Distributor and Broker relating to the sale of
the Contracts shall be maintained so as to clearly and accurately
disclose the nature and details of the transactions. All records
maintained by the Broker in connection with this Agreement shall be the
property of the Company and shall be returned to the Company upon
termination of this Agreement, free from any claims or retention of
rights by the Broker. Nothing in this Section C(8) shall be interpreted
to prevent the Broker from retaining copies of any such records which the
Broker, in its discretion, deems necessary or desirable to keep. The
Broker shall keep confidential any information obtained pursuant to this
Agreement and shall disclose such information only if the Company has
authorized such disclosure or if such disclosure is expressly required by
applicable federal or state regulatory authorities.
D. Compensation
------------
(1) Pursuant to the Distribution Agreement between Distributor and Company,
Distributor shall cause Company to arrange for the payment of commissions
to Broker as compensation for the sale of each contract sold by an

<PAGE>

agent or representative of Broker. Such amounts shall be paid to Broker
or its subsidiary insurance agency, whichever is authorized to receive
insurance commissions under applicable insurance laws, in accordance with
the schedules attached hereto, the General Agent Agreement, and the
commission schedules attached thereto. All terms and conditions of the
General Agent Agreement not otherwise conflicting with the terms herein,
shall be incorporated by reference herein. Company shall identify to
Broker with each such payment the name of the agent or representative of
Broker who solicited each Contract covered by the payment.
(2) Neither Broker nor any of its agents or representatives shall have any
right to withhold or deduct any part of any premium it shall receive for
purposes of payment of commission or otherwise. Neither Broker nor any of
its agents or representatives shall have an interest in any compensation
paid by Company to Distributor, now or hereafter, in connection with the
sale of any Contracts hereunder.
E. Complaints and Investigations
-----------------------------
(1) Broker and Distributor jointly agree to cooperate fully in any insurance
or securities regulatory investigation or proceeding or judicial
proceeding arising in connection with the Contracts marketed under this
Agreement. Broker, upon receipt, will notify Distributor of any customer
complaint or notice of any regulatory investigation or proceeding or
judicial proceeding in connection with the Contracts. Broker and
Distributor further agree to cooperate fully in any securities regulatory
investigation or proceeding or judicial proceeding with respect to
Broker, Distributor, their affiliates and their agents or representatives
to the extent that such investigation or proceeding is in connection with
Contracts marketed under this Agreement. Broker shall furnish applicable
federal and state regulatory authorities with any information or reports
in connection with its services under this Agreement which such
authorities may request in order to ascertain whether the Company's
operations are being conducted in a manner consistent with any applicable
law or regulation. Each party shall bear its own costs and expenses of
complying with any regulatory requests, subject to any right of
indemnification that may be available pursuant to Section G of this
Agreement.
F. Term of Agreement
-----------------
(1) This Agreement shall continue in force for one year from its effective
date and thereafter shall automatically be renewed every year for a
further one year period; provided that either party may unilaterally
terminate this Agreement upon thirty (30) days' written notice to the
other party of its intention to do so.
(2) Upon termination of this Agreement, all authorizations, rights and
obligations shall cease except (a) the agreements contained in Section E
hereof; (b) the indemnity set forth in Section G hereof; and (c) the
obligations to settle accounts hereunder, including commission payments
on premiums subsequently received for Contracts in effect at the time of
termination or issued pursuant to applications received by Broker prior
to termination.
(3) Distributor and Company reserve the right, without notice to Broker, to
suspend, withdraw or modify the offering of the Contracts or to change
the conditions of their offering.
G. Indemnity
---------
(1) Broker shall be held to the exercise of reasonable care in carrying out
the provisions of this Agreement.
(2) Distributor agrees to indemnify and hold harmless Broker and each officer
or director of Broker against any losses, claims, damages or liability,
joint or several, to which Broker or such officer or director become
subject, under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of a
material fact, required to be stated therein or necessary to make the
statements therein not misleading, contained in any Registration
Statement or any post-effective amendment thereto or in the Prospectus or
any amendment or supplement to the Prospectus, or any sales literature
provided by the Company or by the Distributor.
(3) Broker agrees to indemnify and hold harmless Company and Distributor and
each of their current and former directors and officers and each person,
if any, who controls or has controlled Company or Distributor within the
meaning of the 1933 Act or the 1934 Act, against any losses, claims,
damages or liabilities to which Company or Distributor and any such
director or officer or controlling person may become subject, under the
1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon:
(a) Any unauthorized use of sales materials or any verbal or written
misrepresentations or any unlawful sales practices concerning the
Contracts by Brokers, its agents, employees or representatives; or
(b) Claims by agents or representatives or employees of Broker for
commissions, service fees, development allowances or other compensation
or remuneration of any type;
(c) The failure of Broker, its officers, employees, or agents to comply
with the provisions of this Agreement; and Broker will reimburse Company
and Distributor and any director or officer or controlling person of
either for any legal or other expenses reasonably incurred by Company,
Distributor, or such director, officer of controlling person in
connection with investigating or defending any such loss, claims, damage,
liability or action. This indemnity agreement will be in addition to any
liability which Broker may otherwise have.
H. Assignability
-------------
<PAGE>

This Agreement shall not be assigned by either party without the written
consent of the other.

I. Governing Law
-------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of Iowa.

J. Notices
-------

All communications under the Agreement shall be in writing and shall be
deemed delivered when mailed by certified mail, postage prepaid.
Alternatively, communications shall be deemed delivered by timely
transmission of the writing, delivery charges prepaid, to a third party
company or governmental entity providing delivery services in the
ordinary course of business, which guarantees delivery to the other party
on the next business day. Notices shall be sent to the following
addresses unless and until the addressee notifies the other party of a
change in address according to the terms of this Section:

<TABLE>
<S> <C>
(1) if to Broker, to: (2) if to the Distributor or Company,
send to the Company, to:

------------------------------ AUSA Life Insurance Company, Inc.
------------------------------(street address) Financial Markets Division
------------------------------ 4333 Edgewood Road NE
------------------------------(city, state, zip) Cedar Rapids, Iowa 52499
------------------------------(telephone no.)
------------------------------(fax no.) (319) 297-8208 (telephone no.)
Attention: (319) 297-8132 (fax no.)
------------------

</TABLE>

In Witness Whereof, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.

--------------------------------
(Broker Name)

By:
-----------------------------
Title:
--------------------------

AFSG SECURITIES CORPORATION
(Distributor)

By:
-----------------------------

Title:
--------------------------

AUSA LIFE INSURANCE COMPANY, INC.
(Company)

By:
-----------------------------
Title:
--------------------------

<PAGE>

EXHIBIT A

General Letter of Recommendation

BROKER-DEALER hereby certifies to the Company that all the following
requirements will be fulfilled in conjunction with the submission of
licensing/appointment papers for all applicants as agents of the Company
submitted by BROKER-DEALER. BROKER-DEALER will, upon request, forward proof of
compliance with same to the Company in a timely manner.

1. We have made a thorough and diligent inquiry and investigation relative to
each applicant's identity, residence and business reputation and declare
that each applicant is personally known to us, has been examined by us, is
known to be of good moral character, has a good business reputation, is
reliable, is financially responsible and is worthy of a license. Each
individual is trustworthy, competent and qualified to act as an agent for
the Company to hold himself out in good faith to the general public.

2. We have on file a U-4 form which was completed (and has been amended, as
required) by each applicant. We have fulfilled all the necessary
investigative requirements for the registration of each applicant as a
registered representative through our NASD member firm, including but not
limited to: (i) checking for and investigating criminal arrest and
conviction records available to Broker-Dealer on the CRD system; and (ii)
communicating with each employer of the applicant for 3 years prior to the
applicant's registration with our firm. Each applicant is presently
registered as an NASD registered representative.

The above information in our files indicates no fact or condition which
would disqualify the applicant from receiving a license and all the findings
of all investigative information is favorable.

At the time of application, in those states required by the Company, we
shall provide the Company with a copy of the entire U-4 form, or designated
pages, thereof, completed by each applicant, including any amendments or
updates thereto, and we certify those items are true copies of the
original.

3. We certify that all educational requirements have been met for the
specified state each applicant is requesting a license in, and that all
such persons have fulfilled the appropriate examination, education and
training requirements.

4. If the applicant is required to submit his picture, his signature, and
securities registration in the state in which he is applying for a license,
we certify that those items forwarded to the Company are those of the
applicant and the securities registration is a true copy of the original.

5. We hereby warrant that the applicant is not applying for a license with the
Company in order to place insurance chiefly and solely on his life or
property, or lives or property of his relatives, or property or liability
of his associates.

6. We will not permit any applicant to transact insurance in a state as an
agent until duly licensed and appointed therefor with the appropriate
State Insurance Department. No applicants have been given a contract or
furnished supplies, nor have any applicants been permitted to write,
solicit business, or act as an agent in any capacity, and they will not be
so permitted until the certificate of authority or license applied for is
received.

<PAGE>

EXHIBIT (10)(a)
---------------

CONSENT OF INDEPENDENT AUDITORS

<PAGE>

Consent of Independent Auditors

We consent to the reference to our firm under the captions "Financial
Statements" in the Prospectus and "Independent Auditors" in the Statement of
Additional Information and to the use of our report dated March 27, 1998 with
respect to the financial statements of AUSA Endeavor Variable Annuity Account,
and to the use of our report dated February 27, 1998 with respect to the
statutory-basis financial statements and schedules of AUSA Life Insurance
Company, Inc., included in Post-Effective Amendment No. 7 to the Registration
Statement (Form N-4 No. 33-83560) and related Prospectus of The Endeavor
Variable Annuity.

/s/ Ernst & Young LLP

Des Moines, Iowa
April 27, 1998

<PAGE>

EXHIBIT (10)(b)
---------------

OPINION AND CONSENT OF ACTUARY

<PAGE>

April 13, 1998

AUSA Life Insurance Company, Inc.
666 Fifth Avenue
New York, NY 10103

Re: AUSA Endeavor Variable Annuity Account Registration on Form N-4
SEC File No. 33-83560

Dear Sir/Madam:

With regard to the above registration statement, I have examined such documents
and made such inquiries as I have deemed necessary and appropriate, and on the
basis of such examination, have the following opinions:

Fees and charges deducted under the AUSA Endeavor Variable Annuity policies are
those deemed necessary to appropriately reflect:

(1) the expenses incurred in the acquisition and distribution of the Policies,

(2) the expenses associated with the development and servicing of the policies,

(3) the assumption of certain risks arising from the operation and management
of the Policies and that provides for a reasonable margin of profit.

Fees and charges assessed against the policy values in the Variable Account
include:

(i) Service Charge and Administrative Charge

(ii) Contingent Deferred Sales Charge (Surrender Charge)

(iii) Mortality and Expense Risk Fee (M&E)

(iv) Taxes (including Premium and other Taxes if applicable)

The magnitude of each of the individual charges listed above in (i) through (iv)
is established in the pricing of the AUSA Endeavor Variable Annuity, to achieve
a reasonable Return on Investment (ROI), which is within the range of industry
practice with respect to comparable variable annuity products.

<PAGE>

AUSA Life Insurance Company, Inc.
April 13, 1998
Page 2

In the process of determining the reasonable ROI, each individual charge is also
established within the reasonable range of industry practice. For example, in
conjunction with the pricing process the company has analyzed publicly available
information pertaining to similar industry products, taking into consideration
such factors as current charge levels, the existence of charge level guarantees,
guaranteed death benefits, and guaranteed annuity rates. The methodology and
results of the comparative surveys included in this analysis are maintained at
the company's administrative offices.

Except by coincidence, it is not expected that actual charges assessed in a
given year would exactly offset actual expenses incurred. Acquisition expenses
(as well as major product and/or systems development expenses) are incurred "up
front" and recovered, with a reasonable profit margin, through future years'
charges. In addition, the company cannot increase certain charges under the
Policies in the pricing process.

Therefore, in my opinion, the fees and charges deducted under the Policies, in
the aggregate, are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by the company.

I hereby consent to the use of this opinion, which is included as an Exhibit to
the Registration Statement.

/s/ Calvin R. Birkey
- ---------------------------------
Calvin R. Birkey, FSA, MAAA
Managing Actuary
AUSA Life Insurance Company, Inc.